- 1 Banking Sector Reforms
- 2 Key Recommendations
- 3 FAQs Banking Sector Reforms
- 3.1 What were the recommendations of the Narasimham Committee (1991 and 1998) regarding the banking sector?
- 3.2 What was the perspective of the Verma Committee regarding bank consolidation?
- 3.3 What are the CAMEL parameters used for assessing bank performance?
- 3.4 What is Mission Indra Dhanush, and what are its components according to the PJ Nayak Committee?
- 3.5 What initiatives were undertaken to implement Mission Indra Dhanush and address challenges in PSBs?
- 4 More Articles
Banking Sector Reforms
- Narasimham committee (1991 and 1998): suggested merger of strong banks both in the public & private sector.
- Verma committee: viewed consolidation will lead to pooling of strengths and lead to overall reduction in cost of operations.
- CAMEL parameters: Capital adequacy (C) + Assets quality (A) + Management Efficiency (M) + Earning Quality (E) + Liquidity (L).
- Mission Indra Dhanush: 7 pronged approach to resolve issues faced by PSBs and improve their overall performance by ABCDEFG. (PJ Nayak Committee)
- Appointment: In order to check the excessive concentration of power and smooth functioning of the banks – Induction of talent from the Private Sector into the public banks, separation of the posts of Chief Executive Officer and the Managing Director
- Bank Board Bureau: The BBB separates the functioning of the PSBs from the government by acting as a middleman.
- Capitalisation: Due to the high NPAs and the need to meet the provisions of the Basel III norms, capitalization of banks by inducing Rs. 70,000 crores were planned.
- De-Stressing: PSBs and strengthening risk control measures and NPAs disclosure.
- Employment: Providing greater flexibility and autonomy to PSBs in hiring manpower.
- Framework of Accountability: Assessment of the banks through measuring the key performance indicators (KPI).
- Governance Reforms: Gyan Sangam, a conclave of PSBs and financial institutions. Bank Board Bureau for transparent and meritorious appointments in PSBs.
Key Recommendations
Here’s a table summarizing the key recommendations and initiatives from various committees and initiatives related to banking reforms in India:
| Initiative/Committee | Recommendations/Initiatives |
|---|---|
| Narasimham Committee (1991 & 1998) | – Suggested merger of strong banks in both public and private sectors. |
| Verma Committee | – Viewed consolidation as leading to pooling of strengths and overall reduction in the cost of operations. |
| CAMEL Parameters | – Capital Adequacy (C) – Assets Quality (A) – Management Efficiency (M) – Earning Quality (E) – Liquidity (L) |
| Mission Indra Dhanush | – 7-pronged approach to resolving issues faced by Public Sector Banks (PSBs) and improving their overall performance (ABCDEFG). |
| – Recommendations from the PJ Nayak Committee. | |
| Appointment | – Induction of talent from the private sector into public banks. |
| – Separation of the posts of Chief Executive Officer and Managing Director to check excessive concentration of power and ensure smooth functioning. | |
| Bank Board Bureau | – Acts as a middleman, separating the functioning of PSBs from the government. |
| Capitalisation | – Planned capitalization of banks by inducing Rs. 70,000 crores to meet Basel III norms and address high NPAs. |
| De-Stressing | – Strengthening risk control measures and disclosure of NPAs in PSBs. |
| Employment | – Providing greater flexibility and autonomy to PSBs in hiring manpower. |
| Framework of Accountability | – Assessment of banks through measuring key performance indicators (KPIs). |
| Governance Reforms | – Gyan Sangam, a conclave of PSBs and financial institutions. |
| – Establishment of Bank Board Bureau for transparent and meritorious appointments in PSBs. |
FAQs Banking Sector Reforms
What were the recommendations of the Narasimham Committee (1991 and 1998) regarding the banking sector?
The Narasimham Committee suggested the merger of strong banks, both in the public and private sectors, to enhance efficiency and stability in the banking system.
What was the perspective of the Verma Committee regarding bank consolidation?
The Verma Committee viewed consolidation as a means to pool strengths and achieve an overall reduction in the cost of operations within the banking sector.
What are the CAMEL parameters used for assessing bank performance?
CAMEL parameters include Capital adequacy, Assets quality, Management Efficiency, Earning Quality, and Liquidity. These parameters are crucial for evaluating the soundness and performance of banks.
What is Mission Indra Dhanush, and what are its components according to the PJ Nayak Committee?
Mission Indra Dhanush is a 7-pronged approach aimed at resolving issues faced by Public Sector Banks (PSBs) and improving their overall performance. Its components, represented by the acronym ABCDEFG, include Appointment, Bank Board Bureau, Capitalisation, De-Stressing, Employment, Framework of Accountability, and Governance Reforms.
What initiatives were undertaken to implement Mission Indra Dhanush and address challenges in PSBs?
Initiatives included the induction of talent from the private sector into public banks, establishment of the Bank Board Bureau to separate PSB functioning from the government, capitalization of banks to meet Basel III norms, strengthening risk control measures and NPAs disclosure, providing flexibility in employment, and implementing governance reforms such as Gyan Sangam and transparent appointments in PSBs through the Bank Board Bureau.
