M. Narasimham Indian Banking Reforms Pioneer Dies

M. Narasimham, a trailblazer in Indian banking reforms, left an indelible mark on the country's financial landscape.

He is best known for spearheading the New Banking Sector Reforms in 1993, which aimed to strengthen the banking system and promote economic growth.

Narasimham's vision was to create a more robust and efficient banking sector, and his efforts led to significant changes in the industry.

M. Narasimham was born on June 3, 1927, in Nellore to Padmavati and Maidavolu Seshachelapati. He came from a family that hailed from Maidavolu village in Guntur district of present-day Andhra Pradesh.

Narasimham completed his education from Presidency College in Madras and went on to study at St John's College, Cambridge. He was a budding cricketer, but his near-sightedness made him ineligible to play for the college team.

Narasimham joined the Reserve Bank of India in 1950 as a research officer in its Economic Department. He later joined the government and served as additional secretary of the Department of Economic Affairs.

Narasimham served as the thirteenth governor of the Reserve Bank of India from May 2, 1977, to November 30, 1977, making him the first and only Reserve Bank cadre officer to hold this position.

Here are some of the key positions Narasimham held in his career:

M. Narasimham's contribution to India's banking sector is a remarkable story of transformation and modernization. His two-part report on reforms in 1991 and 1998 laid the foundation for an efficient and open banking system.

The first volume of his report introduced the definition of non-performing assets, which is still followed today, although the period of overdue loans has been reduced from four quarters to 90 days. This change has helped banks to identify and address problem loans more effectively.

Narasimham's report also suggested a four-tier banking structure, with three to four large banks, including the State Bank of India, at the top and rural banks at the bottom. This structure is still in place today, providing banking services to people in rural areas.

One of the most significant recommendations of his report was the creation of new generation private sector banks, including ICICI Bank, HDFC Bank, and Kotak Mahindra Bank. These banks have grown rapidly and have become major players in the Indian banking sector.

The Narasimham report also suggested the deregulation of interest rates, which has led to increased competition among banks and has helped to modernize the banking sector. This deregulation has allowed banks to offer more competitive rates to customers, making banking services more accessible and affordable.

The report's suggestion to set up a quasi-autonomous body to supervise banks and financial institutions has not been implemented, despite its potential benefits. However, the report's other recommendations, such as the creation of an asset reconstruction fund and the concept of "narrow banks", have been implemented or are being implemented today.

Narasimham's vision for the banking sector was to create an efficient and open system that would provide banking services to all segments of society. His report's recommendations have helped to achieve this vision, and his legacy continues to shape the Indian banking sector today.

M. Narasimham is often referred to as the 'Father of Indian banking reforms'. His contributions to the banking sector are a testament to his dedication and vision.

Narasimham was the chair of two high-powered committees on banking and financial sector reforms, the Committee on the Financial System (1991) and the Committee of Banking Sector Reforms (1998). These committees laid the foundation for India's banking and financial sector reforms.

The Narasimham committee recommended a four-tier banking structure with 3 to 4 large banks, including State Bank of India at the top and rural banks at the bottom. This structure aimed to create a more efficient and open banking system.

The committee also suggested a phased reduction of statutory liquidity ratio and cash reserve ratio, a higher capital adequacy ratio, and deregulation of interest rates. These suggestions were implemented over time, leading to a more competitive banking sector.

Narasimham's report also introduced the concept of non-performing assets (NPAs), defining them as assets for which the interest remains due for a period of four quarters. This definition has been followed in India, although the period of overdue loans tagged as NPAs has been reduced to 90 days.

The Narasimham committee's recommendations facilitated the creation of new generation private sector banks, including ICICI Bank, HDFC Bank, and Kotak Mahindra Bank. These banks raised money from the capital markets, fostering competition and modernization in the banking sector.

Narasimham's contributions to the banking sector have had a lasting impact on India's financial landscape. His legacy continues to inspire and inform banking reforms in India.

M. Narasimham was a prolific author, publishing several books on the Indian economy and financial system. His notable works include "India and the Current Crisis in the International Economy" (1985) and "World Economic Environment and Prospects for India" (1988).

He also wrote "The Financial System, Report" (1992) and "Economic Reforms: Development and Finance" (2002), both of which are considered significant contributions to the field. Additionally, he authored "From Reserve Bank to Finance Ministry and Beyond: Some Reminiscences" (2002).

M. Narasimham's legacy extends beyond his written works. His committee on the financial system (1991) and action taken report on banking sector reforms (1998) had a lasting impact on the Indian financial sector.

M. Narasimham's published works are a testament to his expertise in economics and finance. He authored several books and reports that showcased his understanding of the international economy and its impact on India.

His first book, India and the Current Crisis in the International Economy, was published in 1985 by the IMC Economic Research and Training Foundation. This book marked the beginning of his extensive writing career.

Narasimham's subsequent books include World Economic Environment and Prospects for India (1988) and The Financial System, Report (1992). The latter was a comprehensive report on the financial system in India, published by the India Committee on the Financial System.

He also wrote two books in 2002: Economic Reforms: Development and Finance and From Reserve Bank to Finance Ministry and Beyond: Some Reminiscences. These books demonstrated his in-depth knowledge of economic reforms and his experiences in the finance sector.

Some of his notable reports include the Report of the Committee on the Financial System (1991) and the Action Taken Report -- Committee on Banking Sector Reforms (1998).

Here are some of his notable publications:

M Narasimham, the author of an often-cited two-volume report on banking reforms, has passed away at the age of 94.

He authored a two-part report on banking sector reforms that suggested steps still debated in India today.

Narasimham's report was a significant contribution to the Indian financial sector, and his name will forever be linked to its trajectory.

As governor of the Reserve Bank of India, Narasimham was in office for just seven months, but his legacy extends far beyond that brief period.

He joined the Reserve Bank as a research officer in the economic department and later served as executive director for India at the World Bank and the International Monetary Fund.

Narasimham played a crucial role in securing India's largest IMF support package in 1981, which helped the country navigate a crisis caused by high inflation, drought, and diminished foreign exchange reserves.

This package was arranged for in November 1981 and helped India recover by the beginning of the next financial year.