1. Directed Investment Programme: The commission objected to the system of keeping high liquid assets by commercial Bankss in the signifier of hard currency. gold and unencumbered authorities securities. It is besides known as the statutory liquidness Ratio ( SLR ) .

In those yearss. in India. the SLR was every bit high as 38. 5 per centum. Harmonizing to the M. Narasimham’s Committee it was one of the grounds for the hapless profitableness of Bankss.

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Similarly. the Cash Reserve Ratio- ( CRR ) was every bit high as 15 per centum. Taken together. Bankss needed to keep 53. 5 per centum of their resources idle with the RBI.

2. Directed Credit Programme: Since nationalisation the authorities has encouraged the loaning to agribusiness and small-scale industries at a confessional rate of involvement. It is known as the directed recognition programme. The commission opined that these sectors have matured and therefore do non necessitate such fiscal support. This directed recognition programme was successful from the government’s point of position but it affected commercial Bankss in a bad mode. Basically it deteriorated the quality of loan. resulted in a displacement from the security oriented loan to aim oriented.

Banks were given a immense mark of precedence sector loaning. etc. finally taking to gain eroding of Bankss.3. Interest Rate Structure: The commission found that the involvement rate construction and rate of involvement in India are extremely regulated and controlled by the authorities.

They besides found that authorities used bank financess at a inexpensive rate under the SLR. At the same clip the authorities advocated the doctrine of subsidised loaning to certain sectors. The commission felt that there was no demand for involvement subsidy. It made Bankss handicapped in footings of edifice chief strength and spread outing recognition supply.4. Extra Suggestions: Committee besides suggested that the finding of involvement rate should be on evidences of market forces.

It farther suggested minimising the slabs of involvement. Along with these major job countries M. Narasimham’s Committee besides found assorted incompatibilities sing the banking system in India.

In order to take them and do it more vivacious and efficient. it has given the undermentioned recommendations.Narasimham Committee Report I – 1991The Narsimham Committee was set up in order to analyze the jobs of the Indian fiscal system and to propose some recommendations for betterment in the efficiency and productiveness of the fiscal establishment.The commission has given the following major recommendations: – 1. Decrease in the SLR and CRR: The commission recommended the decrease of the higher proportion of the Statutory Liquidity Ratio ‘SLR’ and the Cash Reserve Ratio ‘CRR’ .

Both of these ratios were really high at that clip. The SLR so was 38. 5 % and CRR was 15 % . This high sum of SLR and CRR meant locking the bank resources for authorities utilizations. It was hinderance in the productiveness of the bank therefore the commission recommended their gradual decrease. SLR was recommended to cut down from 38. 5 % to 25 % and CRR from 15 % to 3 to 5 % .

2. Phasing out Directed Credit Programme: In India. since nationalisation. directed recognition programmes were adopted by the authorities.

The commission recommended phasing out of this programme. This programme compelled Bankss to allow so fiscal resources for the needy and hapless sectors at confessional rates of involvement. It was cut downing the profitableness of Bankss and therefore the commission recommended the fillet of this programme.3. Interest Rate Determination: The commission felt that the involvement rates in India are regulated and controlled by the governments. The finding of the involvement rate should be on the evidences of market forces such as the demand for and the supply of fund.

Hence the commission recommended eliminating authorities controls on involvement rate and phasing out the concessional involvement rates for the precedence sector.4. Structural Reorganizations of the Banking sector: The commission recommended that the existent Numberss of public sector Bankss need to be reduced. Three to four large Bankss including SBI should be developed as international Bankss. Eight to Ten Banks holding countrywide presence should concentrate on the national and cosmopolitan banking services.

Local Bankss should concentrate on part specific banking. Sing the RRBs ( Regional Rural Banks ) . it recommended that they should concentrate on agribusiness and rural funding. They recommended that the authorities should guarantee that henceforth there won’t be any nationalisation and private and foreign Bankss should be allowed broad entry in India.5.

Constitution of the ARF Tribunal: The proportion of bad debts and Non-performing plus ( NPA ) of the populace sector Banks and Development Financial Institute was really dismaying in those yearss. The commission recommended the constitution of an Asset Reconstruction Fund ( ARF ) . This fund will take over the proportion of the bad and dubious debts from the Bankss and fiscal institutes.

It would assist Bankss to acquire rid of bad debts. 6. Removal of Dual control: Those yearss Bankss were under the double control of the Reserve Bank of India ( RBI ) and the Banking Division of the Ministry of Finance ( Government of India ) .The commission recommended the stepping of this system.

It considered and recommended that the RBI should be the lone chief bureau to modulate banking in India. 7. Banking Autonomy: The commission recommended that the populace sector Bankss should be free and independent. In order to prosecute fight and efficiency. Bankss must bask liberty so that they can reform the work civilization and banking engineering upgradation will therefore be easy. Some of these recommendations were subsequently accepted by the Government of India and became banking reforms.Narasimham Committee Report II – 1998In 1998 the authorities appointed yet another commission under the chairmanship of Mr. Narsimham.

It is better known as the Banking Sector Committee. It was told to reexamine the banking reform advancement and design a programme for farther beef uping the fiscal system of India. The commission focused on assorted countries such as capital adequateness. bank amalgamations. bank statute law. etc.It submitted its study to the Government in April 1998 with the undermentioned recommendations. 1.

Strengthening Banks in India: The commission considered the stronger banking system in the context of the Current Account Convertibility ‘CAC’ . It thought that Indian Bankss must be capable of managing jobs sing domestic liquidness and exchange rate direction in the visible radiation of CAC. Therefore. it recommended the amalgamation of strong Bankss which will hold ‘multiplier effect’ on the industry. 2. Narrow Banking: Those yearss many public sector Bankss were confronting a job of the Non-performing assets ( NPAs ) . Some of them had NPAs were every bit high as 20 per centum of their assets. Therefore for successful rehabilitation of these Bankss it recommended ‘Narrow Banking Concept’ where weak Bankss will be allowed to put their financess merely in short term and hazard free assets.

3. Capital Adequacy Ratio: In order to better the built-in strength of the Indian banking system the commission recommended that the Government should raise the prescribed capital adequateness norms. This will further better their soaking up capacity besides. Presently the capital adequateness ration for Indian Bankss is at 9 per centum. 4. Bank ownership: As it had earlier mentioned the freedom for Bankss in its working and bank liberty. it felt that the authorities control over the Bankss in the signifier of direction and ownership and bank liberty does non travel manus in manus and therefore it recommended a reappraisal of maps of boards and enabled them to follow professional corporate scheme.

5. Review of banking Torahs: The commission considered that there was an pressing demand for reexamining and amending chief Torahs regulating Indian Banking Industry like RBI Act. Banking Regulation Act.

State Bank of India Act. Bank Nationalisation Act. etc. This upgradation will convey them in line with the present demands of the banking sector in India. Apart from these major recommendations. the commission has besides recommended faster cybernation.

engineering upgradation. preparation of staff. depoliticizing of Bankss. professionalism in banking.

reexamining bank enlisting. etc.Evaluation of Narsimham Committee ReportsThe Committee was foremost set up in 1991 under the chairmanship of Mr. M. Narasimham who was 13th governor of RBI. Merely a few of its recommendations became banking reforms of India and others were non at all considered. Because of this a 2nd commission was once more set up in 1998.

Equally far as recommendations sing bank restructuring. direction freedom. beef uping the ordinance are concerned. the RBI has to play a major function. If the major recommendations of this commission are accepted.

it will turn out to be fruitful in doing Indian Bankss more profitable and efficient.