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Shvoong Home>Business & Finance>Recomendation on Indian Banking Sector Reform Review

Recomendation on Indian Banking Sector Reform

Book Review   by:PusatIlmu     Original Author: A.V. Rangamadhachary
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A committee consist of 9 members lead by Sri. Narasimham going into various problem  affecting the Banking sector and then give the main recommendation as given below:
  1. Direct Investment,  the Statutory Liquidity Ratio according Bank Regulation Act should be 24% in November 2008 from the total demand and total liabilities. It can be in the form of cash, gold and approved securities. Cash Reserve Ratio also has to be progressively reduced into 3-5%.
  2. Directed Credit Programmes, Banking should concern into priority sector and the portion from total credit should be gradually reduced till 10%. The allocation are distributed to agricultural sector, small Industries, and road transport.
  3. Structure of Interest Rate, The committee recommended that all regulation about interest rate must be removed. It has to be maintain and regulated by the banks. Bank were given freedom to fix the interest rate for their own Prime Lending Rate over Rs. 2 Lacs.
  4. Prudential Norms, Provisioning should be made on the basis of asset classification.
  5. Asset Reconstruction Fund, The ARF must be formed and take over the bad debts occurs from the customer. So there will be securities for the banks.
  6. Capital Adequacy,
  7. Establishment of Private Sector Banks, The reduction of public sector banking and establishment of the private sector banks must be done. The network from local into international level must be build.
  8. Structural Reorganization of Banking Sector
  9. Branch Licensing, Banks should have the full right to open new branch without asking permission from Reserve Bank of India.
  10. Foreign Banks, The recommendation to establish foreign banks to create more competitive and globalize environment. Joint Venture between Foreign and Local Banks also should be permitted.
  11. Debt Recovery Tribunals
  12. Supervision over Banks, The dual control between Reserve Bank of India and Ministry of Finance should end. Reserve Bank of India should be the only supervision over banks

Published: September 16, 2009   
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