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    Narsimham Committee Report.: - SLR To Bring Down To 25% Over 5 Years Period

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    Satish J. Makwana
    The Narasimham Committee Report made several recommendations to reform the Indian banking system, including gradually reducing SLR and CRR ratios over 5 years, making ROI on SLR market-driven, and progressively reducing CRR. It also recommended reducing priority sector lending targets to 10% of total credit. The report suggested Indian banks achieve 8% capital adequacy ratios by specified dates and classified loan assets into standard, sub-standard, doubtful and loss categories with corresponding provisioning norms. It proposed setting up a Debt Recovery Tribunal for faster recovery of bank dues and an Asset Reconstruction Fund to take over bad debts from banks.

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    Narsimham Committee Report.: - SLR To Bring Down To 25% Over 5 Years Period

    Uploaded by

    Satish J. Makwana
    59 views15 pages
    The Narasimham Committee Report made several recommendations to reform the Indian banking system, including gradually reducing SLR and CRR ratios over 5 years, making ROI on SLR market-driven, and progressively reducing CRR. It also recommended reducing priority sector lending targets to 10% of total credit. The report suggested Indian banks achieve 8% capital adequacy ratios by specified dates and classified loan assets into standard, sub-standard, doubtful and loss categories with corresponding provisioning norms. It proposed setting up a Debt Recovery Tribunal for faster recovery of bank dues and an Asset Reconstruction Fund to take over bad debts from banks.

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    Narsimham Committee Report

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    The Narasimham Committee Report made several recommendations to reform the Indian banking system, including gradually reducing SLR and CRR ratios over 5 years, making ROI on SLR market-driven, and progressively reducing CRR. It also recommended reducing priority sector lending targets to 10% of total credit. The report suggested Indian banks achieve 8% capital adequacy ratios by specified dates and classified loan assets into standard, sub-standard, doubtful and loss categories with corresponding provisioning norms. It proposed setting up a Debt Recovery Tribunal for faster recovery of bank dues and an Asset Reconstruction Fund to take over bad debts from banks.

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    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    59 views15 pages

    Narsimham Committee Report.: - SLR To Bring Down To 25% Over 5 Years Period

    Uploaded by

    Satish J. Makwana
    The Narasimham Committee Report made several recommendations to reform the Indian banking system, including gradually reducing SLR and CRR ratios over 5 years, making ROI on SLR market-driven, and progressively reducing CRR. It also recommended reducing priority sector lending targets to 10% of total credit. The report suggested Indian banks achieve 8% capital adequacy ratios by specified dates and classified loan assets into standard, sub-standard, doubtful and loss categories with corresponding provisioning norms. It proposed setting up a Debt Recovery Tribunal for faster recovery of bank dues and an Asset Reconstruction Fund to take over bad debts from banks.

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    of 15

    NARSIMHAM COMMITTEE REPORT.

    THE MAIN RECOMMENDATIONS.


    *SLR TO BRING DOWN TO 25% OVER 5 YEARS
    PERIOD.
    *ROI ON SLR BE MARKET DRIVEN.
    *CRR TO REDUCE PROGRESSIVELY .
    PRIORITY SECTOR LENDING.
    *THE TARGET OF P S LENDING BE
    REDUCED TO 10% OF TOTAL CREDIT.

    P S CREDIT BE REDEFINED & SUBSIDY


    BE GRADUALLY WITHDRAWN.

    ATUL PARIKH 2
    CAPITAL ADEQUACY NORMS.
    *FOREIGN BANKS TO ACHIEVE 8% CAR
    BY MARCH 1993.
    *INDIAN BANKS WITH OVERSEAS
    BRANCHES TO ACHIEVE 8%CAR BY
    March 1994.
    *OTHER BNAKS TO ACHIEVE 8%CAR BY
    MARCH 1996.

    ATUL PARIKH 3
    ACCOUNTING POLICIES.
    LOAN ASSETS BE CLASSIFIED IN 4 CATEGORIES.
    STANDARD; SUB STANDARD; DOUBTFUL; LOSS ASSET.
    PROVISIONING NORMS. (w e f 31/03/2000)
    STANDARD -0.25% ; SUB STASNDARD -10%;
    DOUBTFUL ASSET: 100%OF SECURITY SHORTFALL
    +20%,30%,OR50% DEPENDING ON AGE OF DOUBTFUL
    ADVANCE.
    LOSS ASSETS: 100% OUTSTANDING LOAN AMOUNT.
    *INVESTMENT IN SECURITIES BE BIFURCATED IN TO
    PARMENENT & CURRENT AND PROVIDE DEPRECIATION
    IN CURRENT CATEGORY INVESTMENT.
    ATUL PARIKH 4
    NEW INSTITUTION FOR RECOVERY.
    * DEBT RECOVERY TRIBUNAL BE SET UP FOR
    SPEEDY RECOVERY OF DUES.

    ASSET RECONSTRUCTION FUND BE FORMED


    FOM TO TAKE OVER B & D DEBTS FROM BANKS.

    ATUL PARIKH 5
    ENTRY OF PRIVATE SECTOR BANKS.
    N O F U RT H E R N AT I O N A L I S AT I O N O F
    BANKS.

    N O D I F F E R E N T I A L T R E AT M E N T
    B E T W E E N P U B L I C & PV T. S EC T O R B A N K S .

    N O B A R T O O PE N PV T. S EC T O R B A N K S .

    M O R E FO R E I G N B A N K S B E A L L OW E D T O
    O PE N B R A N C H E S I N I N D I A .

    ATUL PARIKH 6
    BRANCH LICENSING POLICY
    BRANCH LICENSING POLICY BE ABOLISHED OR
    BE RALXED.
    STAFF RELATED ISSUES:
    FREEDOM FOR BANKS TO RECRUIT OFFICERS
    DIRECTLY FROM THE MARKET AND CLERKS ROM
    BSRB,
    ACCELERATED PROMOTION OPORTUNITIES.
    BANKING SUPERVISION BOARD( BOARD FOR
    FINANCIAL SUPERVISION) BE SET UP FOR
    BANKING AND FINANCIAL SUPERVISION OF
    BANKS & F INANCIAL INSTITUTIONS.
    ATUL PARIKH 7
    LEGISLATIVE MEASURES.
    GOVT. SHOULD ALLOW THE BANKS TOP RAISE
    PAID UP CAPITAL FRO THE MARKET & GOVT.
    SHULD DILUTE ITS STAKE GRADUALLY.

    B R ACT BE AMENDED BE AMENDED TO


    ENHANCE TRANSPERANCY AND DISCLOSURE
    NORMS.

    RBI ACT BE AMENDD TO PERMIT BANKS TO


    PERFORM ALL TYPES OF BANKING BUSINESS.

    ATUL PARIKH 8
    NARSIMHAM COMMITTEE REPORT -II
    GOVT. SHOIULD DILUTE ITS SHARE FROM 100%
    TO 33%

    RBI SHOULD WITHDRAW ITS CAPITAL FROM


    SBI.

    *5%RISK WEIGHT BE PROVIDED FOR MARKET


    RISK FOR GOVT AND APPROVED SECURITIES.
    10% PROVISIONS FOR GOVT. GUARATED LOANS
    BE PROVIDED.
    ATUL PARIKH 9
    REDUCTION IN NPA TO GLOBAL LEVEL.
    NET NPA BE BROUGHT DOWN BELOW 5% BY 2000 AND
    TO 3% BY 2002.
    FOR BANKS WITH INTERNATIONAL EXPOSURE GROSS NPA
    TO 5% AND 3% BY SAME PERIOD AND NET NPA SHOULD
    BE 3% & O% BY 2000 & 2002.
    As on March 1998 NPA OF GOVT. BANKS.
    Up to 5% 4 banks
    5% to 10% 15 banks.
    10% to `5% 7 banks.
     Above 15% 2 banks.

    ATUL PARIKH 10
    CAPITAL ADEQUACY RATIO.
    BANKS SHOULD ACHIEVE 9% CAR BY 2000 AND
    10%CAR BY 2002.
    BY 31/03/1998, 19 BANKS ACHIEVED 10% CAR BUT DUE
    TO 15% GROWTH IN RISK WEIGHTED ASSETS,
    ADDITIONAL CAPITAL REQUIREMENT GREW TO
    24,400 CRORES FOR BANKS.

    FOR NEW BANKS ENTRY THE INTIAL CAPITAL


    REQUIREMENT BE RAISED TO RS.200 CRORES & NOW ITS
    ENHANCED TO RS.300 CRORES.
    For FOREIGN BANKS INITIAL CAPITAL BE RAISED
    FROM US$10 million TO US$25 million.
    ATUL PARIKH 11
    RECAPITALISATION OF BANKS.
    INDIAN BANKS PERMITTED TO ACCESS CAPITAL
    MARKETS BOTH HOME & OVERSEAS MARKET AND
    8 PSU BANKS & SBI ALREADY MOBILISED CAPITAL

    • WEAK BANKS WERE CAPITALISED BY THE GOVT


    TO STRENGTHEN THEM.

    • ASCERTAIN REALISABLE VALUE OF DOUBTFUL


    /LOSS ASSETS & TRANSFER TO ARC WHICH
    WOULD ISSUE NPA SWAP BONDS TO THE BANKS.
    ATUL PARIKH 12
    INCOME REGNOTION.
    THE ACCRUAL OF INTEREST INCOME SHOULD BE
    DONE EVERY 90 DAYS RATHER 180 DAYS.
    (NOW INTEREST PPLICATION IS ON MONTHLY BASIS FOR ALL
    CREDIT FACILITIES.)

     Chairman’s Tenure.
     THE CHAIRMAN & MANAGING DIRECTOR SHOULD BE
    APPOINTED FOR MINIMUM 3YEARS TENURE. NEED TO DELINK
    THEIR SALARIES FROM CIVIL SERVICE PAY SCALE AMD SHOULD
    BE MARKET DRIVEN.

    ATUL PARIKH 13
    NARSIMHAM II BANKING REFORMS MAR, 1998

    Dr. Rangrajan., Governer RBI in 1996 indicated for Second


    Generation Reforms fall in 5 broad categories.
    1. Financial market integration has to accord top priority.
    2.Asset Liability Mgt to perform better by banks in deregulated
    environment.
    3. Mgt of Credit -Risk have to be accorded top priority.
    4.Systems & procedures have to be designed proactively &
    innovatively to avoid operational & legal issues.
    5.Organisational effectiveness has to percolate down to techno
    base product driven customer services at par globally.
    Ultimately customer is the king.

    ATUL PARIKH 14
    NARSIMHAM COMMITTEE EFFECT.
    Reduction in SLR + CRR from 63.50% to 30% (SLR25%)
    Dismantling of Administered Interest on loans.
    Redefined the P S lending and directed credit program.
    Improvement in Fin. health of banks through CAR norms,
    recapitalization of banks and restructuring of weak banks.
    Shift in Branch Licensing policy and approval for
    merger/relocation of branches.
    Setting up of DRT and SRFAESI Act 2002.
    Advent of new private sector banks.
    Deregulation of interest on Term Deposit.
    Freedom of banks to decide PLR.
    Introduction of Banking Ombudsman Scheme in 1995.
    ATUL PARIKH 15

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