BANKING REFORMS

COMMITTEES

NEWS
RBI curbs free usage of cross-bank ATMs
ICICI Bank offers EMI scheme on debit card
purchase
RBI to conduct frequent term repos for
flexible cash management
RBI to lower ceiling on bank loans to single
corporate group
Jaitley nudges RBI to cut rate for boosting
growth

NAYAK COMMITTEE

THE RESERVE BANK OF INDIA CONSTITUTED ON 9

DECEMBER
1991, A COMMITTEE UNDER THE
CHAIRMANSHIP OF MR. P.R. NAYAK, DEPUTY
GOVERNOR TO EXAMINE THE DIFFICULTIES
CONFRONTING THE SMALL SCALE INDUSTRIES (SSI)
IN THE COUNTRY IN THE MATTER OF SECURING
FINANCE.

SALIENT FEATURES
Give preference to village industries, tiny industries and other small
scale industries
Each branch of the banks should prepare an annual budget in
respect of working capital requirements of all SSI's
single financing agency meets both the requirement of the working
capital and term credit for small scale units
Raise aggregate fund-based working capital credit limits
ensure regular and timely submission of monthly statements of
stocks, receivables
Dues should settled by borrowers within a maximum period of 30
days from date of supply and it is to be certified by the statutory
auditors of the borrowing units on a quarterly basis

RECOMMENDATIONS
There is a need to upgrade the quality of board deliberation
in public sector banks to provide greater strategic focus
The Calendar of Reviews needs either to be revoked, or
else to be freshly designed so as to give specific attention
to business strategy and risk management
The Government needs to move rapidly towards
establishing fully empowered boards in public sector banks
The Government should set up a Bank Investment
Company (BIC) to hold equity stakes in banks which are
presently held by the Government and BIC should be
incorporated under the Companies Act

CONTINUED
It would be desirable for the bank licensing regime to
move to a uniform license across all broad-based banks
It is recommended that Bank Boards Bureau (BBB) to be
set up by an executive order of the government and
comprise three senior bankers chosen from among those
who are either serving or retired Chairmen of banks
RBI should designate a specific category of investors in
banks as Authorised Bank Investors (ABIs)
Wherever significant evergreening in a bank is detected
by RBI, it is recommended that RBI imposes penalties

SEVEN POINT ACTION PLAN

Time bound action for setting up specialised SSI branches in 85
identified districts of high small industry density.
Adequate delegation of powers at the branch and regional level.
Banks to conduct sample surveys of their performing SSI accounts
to find out whether they are getting adequate credit.
Steps to be taken to see that as far as possible composite loans
(covering both term loans and working capital) are sanctioned to
SSI entrepreneurs.
Regular meetings by banks at Zonal and Regional levels with SSI
entrepreneurs.
Need to sensitize bank managers and reorient them regarding
working of the SSI sector.
Simplification of procedural formalities by banks for SSI
entrepreneurs.

GOIPORIA COMMITTEE

RECOMMENDATION

Commencement of employees working hours.

Customer entering before closure must be entertained.
Staff at the counters should undertake the following transactions during
the extended hour :

A) Non-Voucher generating transactions:1) Issue of pass book/statement of accounts.

2) Issue of cheques book.
3) Delivery of term deposit receipts/draft.
4) Acceptance of share application form
5) Acceptance of clearing cheques /bills for collection

RECOMMENDATION

b) Voucher generating transaction :1) Issue of term deposit receipts (TDR)

2) Acceptance of cheques for locker rent due
3) Issue of traveler cheques.
4) Issue of gift cheques.
5) Acceptance of individual cheques for transfer
credit.

RECOMMENDATION

No counter remains unattended and uninterrupted service is rendered to

the customers.
'Enquiry' or May I help you?
Nomination should be a rule.
Correct & Legible update of passbook.
Instant credit of outstation cheques may be raised to Rs. 5,000 (from Rs.
2,500).
Dishonoured instruments may be returned/dispatched to the customer
within 24 hours.

RECOMMENDATION

Providing adequate space, proper furniture, drinking water facilities, etc.

Time norms for specialised business transactions should be displayed
predominantly in the banking hall.

TANDON
COMMITEE

TANDON COMMITTEE ON FOLLOW-UP OF

BANK CREDIT
Till mid-1970 the principle of commercial bank lending
in India was predominantly security oriented.
Major Banks were nationalized in 1969
In 1974, a study group
P.L.Tandon was formed.

under the chairmanship of

The group submitted its report in August 1975.

It is applicable to borrowers availing fund based working
capital limits of Rs. 10 lac or more

TANDON COMMITTEES RECOMMENDATIONS

For corporates:
Accumulation of too much of stocks
Inventory and receivable norms.
First Method of Lending
Second Method of Lending
Third Method of Lending

NARASIMHAM COMMITTEE

 History
Narsiman committee I
Narsiman committee II
The purpose of the Narasimham-I Committee was to study all aspects
relating to the structure, organisation, functions and procedures of the
financial

 The Narasimham-II Committee was tasked with the progress

review of the implementation of the banking reforms since
1992
It focussed on issues like size of banks andcapital adequacy
ratio among other things.

AUTONOMY IN BANKING

Greater autonomy was proposed for thepublic sectorbanks

The committee recommended GOI equity in nationalized banks be
reduced to 33% for increased autonomy.
As such the committee recommended a review of functions of banks
boards

REFORM IN THE ROLE OF RBI

The Committee proposed a segregation of the roles of RBI as

aregulatorof banks andownerof bank
The RBI decided to transfer its respective shareholdings of public banks
likeState Bank of India(SBI),National Housing Bank(NHB) andNational
Bank for Agriculture and Rural Development(NABARD) to GOI.

STRONGER BANKING SYSTEM

Merger of large Indian banks to make them strong enough for supporting
international trade.
Use of mergers to build the size and strength of operations for each bank
There were a string of mergers in banks of India during the late 90s and
early 2000s

NON-PERFORMING ASSETS

Non-performing assets had been the single largest cause of irritation of

the banking sector of India
Need for 'zero' non-performing assets for all Indian banks with
International presence
creation of Asset Reconstruction Funds or Asset Reconstruction Companies
to take over the bad debts of banks

ENTRY OF FOREIGN BANKS

The foreign banks seeking to set up business in India should

have a minimum start-up capital of $25 million
Foreign banks can be allowed to set up subsidiaries

THANK YOU