Narasimham committee on banking sector reforms

Partner With Us Economic Reforms The strategy of reforms introduced in India in July presented a mixture of macroeconomic stabilization and structural adjustment.

Narasimham committee on banking sector reforms

Narasimham committee on banking sector reforms

Banks are one of the oldest financial intermediaries in the financial system. They play an important role in mobilization of deposits and disbursement of credit to various sectors of the economy.

The banking sector is dominant in India as it accounts for more than half the assets of the financial sector.

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The business of banking is that of an intermediary between the saving and investment units of the economy. It collects the surplus funds of millions of individual savers who are widely scattered and channelize them to the investor.

Banking company means any company which transacts the business of banking in India. No company can carry on the business of banking in India unless it uses as part of its name at least one of the words bank, banker or banking. The essential characteristics of the banking business as defined in section 5 b of the Banking Regulation Act are: Chanakya in his Arthashastra written in about B.

The Jain scriptures mention the names of two bankers who built the famous Dilwara Temples of Mount Abu during and A. The bankers of Lombardy were famous in England. But modern banking began with the English goldsmith only after But the first bank in the modern sense was established in the Bengal Presidency as the Bank of Bengal in Their trading activities required the remittances of money from one place to another.

The next stage in the growth of banking was the goldsmith. The business of goldsmith was such that he had to take special precautions against theft of gold and jewellery.

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List of Committees Related to Banking & Finance Committees in India T he Narasimham Committee laid the foundation for the reformation of the Indian banking sector. The main recommendations of the Committee were:
eBook formats Later Nationalization of banks, consolidation, diversification, liberalization of the banking industry in s and s were part of the ongoing reforms. Narasimham committee Recommendations revolved around:

If he seemed to be an honest person, merchants in the neighborhood started leaving their bullion, money and ornaments in his care. As this practice spread, the goldsmith started charging something for taking care of the money and bullion.

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As evidence for receiving valuables, he issued a receipt. Since gold and silver coins had no marks of the owner, the goldsmith started lending them. As the goldsmith was prepared to give the holder of the receipt an equal amount of money on demand, the goldsmith receipts became like cheques as a medium of exchange and a means of payment.

The next stage in the growth of banking is the moneylender. The goldsmith found that on an average the withdrawals of coins were much less than the deposits with him.

Narasimham committee on banking sector reforms

So he started advancing the coins on loan by charging interest. As a safeguard, he kept some money in the reserve. Thus the goldsmith-money-lender became a banker who started performing the two functions of modern banking that of accepting deposits and advancing loans.

In India our historical, cultural, social and economic factors have resulted in the Indian money market being characterized by the existence of both the unorganized and the organized sectors.

The unorganized sector comprises moneylenders and indigenous bankers which cater to the needs of a large number of people especially in the rural areas. They have been meeting the financial requirements of the rural populace since times immemorial.

Their importance can be gauged from the fact that Jagat Seths, hereditary bankers of the Nawab of Bengal, were recognized even by Aurangzeb and the East India Company who were compelled to borrow from them also publicly honored them.

The indigenous bankers are different from the proper banks in a number of ways. For instance, they combine banking activities with trade whereas trading is strictly prohibited for banks in the organized sector.

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They do not believe in formalities or paper work for making deposits or withdrawing money. In fact, since a substantial percentage of their clientele is illiterate, they frequently take a thumb impression of their customers on a blank paper.

The rate of interest charged by them fluctuates directly with the need of the borrower and may sometimes be as high as percent! They are insulated from all type of monetary and credit controls as they fall outside thy purview of RBI.

Though they are still the major source of funds for small borrowers, but now their market has started shrinking because of the fast expansion of branches of banks in the unorganized sectors.

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For centuries, banks have borrowed and lent money to business, trade, and people, charging interest on loans and paying interest on deposits.

These two functions are the core activities of banking. Besides these two functions, a commercial bank performs a variety of other functions which can be categorized in two broad categories namely a Agency or Representative functions b General Utility functions. Banks carry out the standing instructions of customers for making payments; including subscriptions, insurance premium, rent, electricity and telephone bills, etc.A committee set up in the chairman ship of M.

Narasimham, ex-RBI governor to design and implement financial sector reforms in first Narasimham Committee (Committee on the Financial System – CFS) was appointed by Manmohan Singh as India's Finance Minister on 14 August The purpose of the Narasimham Committee- I was to study all aspects relating to the structure, .

These days most of the competition examinations have a paper for Financial Awareness or Banking Awareness. Moreover, candidates appearing in banking interviews and internal promotion exams always look for some easy to understand study material.

NARASIMHAM COMMITTEE RECOMMENDATIONS To bring about greater efficiency in banking operations, the Narasimham committee () proposed substantial reduction in number. At the turn of the century, the then Indian finance minister Yashwant Sinha signalled a move towards banking sector reforms.

While presenting the Budget of , Sinha said the government had. Narasimham, Chairman, submitted the report of the Committee on Banking Sector Reforms (Committee-II) to the Finance Minister Yashwant Sinha in April Recommendations of Narsimham Committee. 4 tier bank 4 tier banking structure: International Level .

Reforms in banking sector started even before independence with passing of The Reserve Bank of India Act, (RBI Act). Later Nationalization of banks, consolidation, diversification, liberalization of the banking industry in s and s were part of the ongoing reforms.

The Committee submitted its report to the Finance Minister in November which was tabled in Parliament on 17 December M. Narasimham, Chairman, submitted the report of the Committee on Banking Sector Reforms (Committee-II) to the Finance Minister Yashwant Sinha in April Enablers India 1 Narasimham Committee on Banking Sector Reforms () Reports of the Narasimham Committees • The purpose of the Narasimham-I Committee was . 1 Committee on Banking Sector Reforms (Narasimham Committee II) - Action taken on the recommendations Recommendation Action Taken Measures to strengthen the banking system: Capital Adequacy: 1. The Committee suggests that pending the Banks are now required to assign capital for emergence of markets in India where market market risk.
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