Narasimham Commitee
• From the 1991 India economic crisis to its status of third largest economy in the world by 2011, India has grown significantly in terms of economic development. So has its banking sector.
• During this period, recognising the evolving needs of the sector, the Finance Ministry of Government of India (GOI) set up various committees with the task of analysing India's banking sector and recommending legislation and regulations to make it more effective, competitive and efficient.[1]
• Two such expert Committees were set up under the chairmanship of M. Narasimham.
• They submitted their recommendations in the 1990s in reports widely known as the Narasimham Committee-I (1991) report and the Narasimham Committee-II (1998) Report.
• These recommendations not only helped unleash the potential of banking in India, they are also recognised as a factor towards minimising the impact of global financial crisis starting in 2007.
• Unlike the socialist-democratic era of the 1960s to 1980s, India is no longer insulated from the global economy and yet its banks survived the 2008 financial crisis relatively unscathed, a feat due in part to these Narasimham Committees.
Recommendations of Narasimham committee
The 1998 report of the Committee to the GOI made the following major recommendations:
Autonomy in Banking
Greater autonomy was proposed for the public sector banks in order for them to function with equivalent professionalism as their international counterparts.[11] For this the panel recommended that recruitment procedures, training and remuneration policies of public sector banks be brought in line with the best-market-practices of professional bank management.[4][6] Secondly, the committee recommended GOI equity in nationalized banks be reduced to 33% for increased autonomy.[4][12][13] It also recommended the RBI relinquish its seats on the