Narsimham committee recommendations and financial reforms

Narsimham committee recommendations and financial reforms

• 1.
  Presented by- Abhishek Sharma NehaGoyal Pragati Bhargava Sanjeev Yadav
• 2.
   Reformation orchanges in policies, laws, structure, functioning and framework of financial departments of country.  Aimed to create an efficient, competitive and stable financial sector that could contribute to growth of country.  Changes according to requirements of economic situation of country.
• 3.
   In 1991,India was facing major economic crisis, BOP crisis.  Forex reserves were extremely low, not even able to pay 1 week import bill.  Economic growth was less than 2%.  Almost all the banks were incurring losses.  Indian economy was at collapse condition.  Significant reforms were made by Mr. Manmohan Singh in 1991.
• 4.
  Capital market reforms Establishment Of SEBI in 1992.  As Apex regulator of Indian Capital market.  To protect the interest of investors in securities market.  To frame entry norms, code of conduct and functioning.  Opening the capital market to foreign investors.  An important policy initiative in 1993.  Opening the capital market to Foreign Institutional Investors(FII).  Include mutual funds, pension funds, and other foreign investments.
• 5.
   Modernization oftrading and settlement system.  On-line trading was introduced in all stock exchanges.  Settlement period was reduced to one week.  Dematerialization account was introduced.  Setting up new stock exchanges.  Initially BSE was main exchange.  NSE was set up in 1994 as automated electronic exchange.  Spread the business and work of stock exchange across the country.
• 6.
  Earlier banking Structurereforms:  In 1955, Imperial bank of India was nationalised to State Bank of India(SBI).  In 1956, 7 regional banks were nationalised as associate bank of SBI.  In 1969, 14 big commercial banks were nationalised having deposits worth Rs. 50 crore or more.  In 1980, 6 other scheduled banks were nationalised.  Significant reforms were done in 1991.
• 7.
  INTRODUCTION  The 1stNarsimham committee was set up by Mr. Manmohan Singh on 14th August 1991.  A nine member committee was set up under the chairmanship of Mr. M. Narsimham, former Governor of RBI.  The committee submitted its report in November 1991, passed by parliament on 17th Dec. 1991.  Recommendations on: ◦ Structure of banks ◦ Organisation of banks ◦ Functions of banks ◦ Procedures. Mr. M. Narsimham
• 8.
  RECOMMENDATIONS:  Structural reorganisationof banks- substantial reduction.  Freedom to foreign banks to open offices- as branches or subsidiaries.  Special tribunal for recovery of loans- granted by banks.  Statutory Liquidity Ratio(SLR) & Cash Reserve Ratio(CRR). -SLR should be reduced from present 38.5% to 25% over next 5 years. -CRR should be reduced from present 15% to 3-5%.  Removal of duality of control over bank- only RBI should control, not banking division of ministry of finance.  Adoption of uniform accounting practices- full disclosure of assets and liabilities as per international accounting standards.
• 9.
  Narsimham committee ReportII (1998)  The 2nd Narsimham committee was made by Mr. p. Chidambaram in 1997.  Committee submitted report to finance minister Mr. Yashwant Sinha in April 1998.  It was known as committee on Banking sector reforms.  Mainly focused on:  Capital Adequacy Ratio(CAR).  Size of banks.  Review progress and implementation of reforms. Mr. P. Chidambaram Mr. Yashwant Sinha
• 10.
  RECOMMENDATIONS:  Greater Autonomyin banking in both Ownership and management.  Reformation 0f role of RBI. - Segregate regulatory and supervisory role of RBI. - Withdraw its day treasury bill from market.  Stronger banking system by merger of strong banks.  Capital Adequacy Ratio and tightening of provisioning norms. -Raising the CAR to 9% by 2000 and 10% by 2002.  Non Performing Assets. - Need for “zero” NPA for all Indian banks. -Creation of Asset Reconstruction Funds to take over the bad debts.  Need for more computerisation process in banks.
• 11.
  THANK YOU