Q. Which of the following does not represents the recommendations of the Narashimhan Committee?
1. SLR and CRR should be increased over the period of time.
2. The banks should be allowed to set the interest rates for their customers thus deregulating interest rates.
Select the correct answer using the codes given below:

[A] 1 only

[B] 2 only

[C] Both 1 and 2

[D] Neither 1 nor 2

Answer: A

Explanation: In August 1991, Government of India appointed a high level committee under the Chairmanship of Shri M. Narasimham to examine all aspects relating to the structure organisation, functions and procedures of the financial system.

The main recommendations of the committee are as follows:

  • The Narasimham Committee recommended that SLR should be reduced to 25% over the period of 5 years and CRR should be reduced to 10% over the period of time.
  • It redefined the priority sector to include the marginal farmers, tiny sector, small business and transport sector, village and cottage industries etc.
  • The committee recommended deregulation of the Interest Rates, so that banks can themselves set the interest rates for their customers.
  • It also recommended setting up tribunals for recovery of Loans, tackling doubtful debts, restructuring the banks and allowing entry of the new private Banks.

Source: Ramesh Singh