Final ppt narsimham
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Final ppt narsimham

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Final ppt narsimham Final ppt narsimham Presentation Transcript

  • Narasimham Committee Presented by: ASHUTOSH A. ANAY V. KUSHANG T. ARCHANA T.
    • 1969- Banks Nationalization
    • ‡ Effects
    • Phenomenal increase in the geographical
    • coverage of our banking and financial institutions.
    • Despite impressive quantitative achievement- low
    • efficiency and productivity, bad portfolios performance, and eroded profitability.
    • Several public sector banks and financial
    • institutions were incurring losses year after year.
    Why the Committee
    • 1991 -RBI proposed the committee chaired by
    • M. Narasimham, former RBI Governor to
    • review the Financial System
    • ‡ Review- aspects relating to the Structure,
    • Organization, Procedures and Functioning of
    • the financial system
    • Constituted in 1991, the Committee submitted two reports, in 1992 and 1998, which laid significant thrust on enhancing the efficiency and viability of the banking sector
    • T he Narasimham Committee laid the foundation for the reformation of the Indian banking sector
    About the committee
    • Higher rates of CRR(15%) and SLR(38.5%)
    • Directed credit programs
    • Political and Administrative interference
    • Subsidizing of credit
    • Mounting expenditures of banks
    Problems faced then
    • Reduction of Statutory Liquidity Ratio (SLR) to 25 per cent over a period of five years
    • Progressive reduction in Cash Reserve Ratio (CRR) to 3-5%
    • Phasing out of directed credit programme and redefinition of the priority sector
    • Stipulation of minimum capital adequacy ratio of 8 per cent by March 1996. (Capital adequacy ratios ("CAR") are a measure of the amount of a bank's capital expressed as a percentage of its risk weighted credit exposures.)
    • Adoption of uniform accounting practices in regard to income recognition, asset classification and provisioning against bad and doubtful debts
    The main recommendations of the Committee were: -
    • Setting up of special tribunals to speed up the recovery process of loans
    • Setting up of Asset Reconstruction Funds (ARFs) to take over from banks a portion of their bad and doubtful advances at a discount
    • Abolition of branch licensing
    • Liberalizing the policy with regard to allowing foreign banks to open offices in India
    • Giving freedom to individual banks to recruit officers
    • Revised procedure for selection of Chief Executives and Directors of Boards of public sector banks
    • Speedy liberalization of capital market
    • Enactment of a separate legislation providing appropriate legal framework for mutual funds and laying down prudential norms for such institutions, etc.
    CONTD
    • 1998- Finance minister appointed Mr. Narasimham as chairman of one more committee.
    • This committee was asked to “review the progress of banking sector reforms to date and a programme on financial sector reforms to strengthen India's financial system and make it internationally competitive”.
    • The committee submitted its report to the government in April 1998.
    • The report covered issues like- capital adequacy, bank mergers, recasting bank board, and creation of global sized banks.
    Committee On Banking Sector Reforms 1998
    • Need for stronger banking system
    • Experiment with concept of narrow banking
    • Small local banks
    • Capital Adequacy Ratio
    • Review and update banking laws.
    Major Recommendations of Narasimham Committee 1998
  • T he Effect
    • Emergence of 9 new private sector banks
    • Opening up of vibrant capital market
    • Great impact on banks balance sheets both on assets and liabilities side
  • LIABILITY Deposit interest rate Increase in capital Adequacy requirement ASSET Reforms on Lending rate Lower CRR and SLR IRAC norms Other Reforms Structural Reforms Entry to new business lines
  • Some Fact
    • ‡ Nationalization of banks in 1969:
    • 14 banks were nationalized
    • Branch expansion: Increased from 8260 in
    • 1969 to 71177 in 2006
    • ‡ Population served per branch has come down
    • from 64000 to 16000
    • ‡ A rural branch office serves 15 to 25 villages
    • within a radius of 16 kms
    • ‡ However, at present only 32,180 villages out
    • of 5 lakh have been covered
  • Some Fact Contd….
    • ‡ Deposit mobilization
    • 1951-1971 (20 years)- 700% or 7 times
    • 1971-1991 (20 years)- 3260% or 32.6 times
    • 1991- 2006 (11 years)- 1100% or 11 times
    • Expansion of bank credit: Growing at 20-30% p.a.
    • thanks to rapid growth in industrial and agricultural
    • output
    • Development oriented banking: priority sector
    • lending
  • Some Fact Contd….
    • ‡ Diversification in banking:
    • Banking has moved from deposit and lending to
    • Merchant banking and underwriting
    • Mutual funds
    • Retail banking
    • A T Ms
    • Internet banking
    • Venture capital funds
    • Factoring
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