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ENHI

RAS question

Which committee recommended the introduction of Basel norms in Indian banking?

Correct answer: (B) Narasimham Committee.

The Narasimham Committee recommended the introduction of Basel-based capital adequacy norms in Indian banking.

  1. (A)

    Rangarajan Committee

  2. (B)

    Narasimham Committee

  3. (C)

    Tendulkar Committee

  4. (D)

    Kelkar Committee

Explanation

The answer is the Narasimham Committee because RBI links India’s capital adequacy framework for commercial banks to the Committee on Financial Sector Reforms, also known as Narasimham Committee I. The 1991 and 1998 Narasimham reform agenda covered banking-sector reforms such as adoption of Basel capital adequacy norms, reduction of NPAs, phased reduction of CRR and SLR, and restructuring of the banking system. RBI’s master circular explains the Basel framework as a risk-weighted capital adequacy system and states that RBI introduced a minimum CRAR of 8% in 1992 for commercial banks on the committee’s recommendations. In this banking-reform context, Basel norms are linked to Narasimham, not to the other reform committees.

Why the other options are wrong

  • (A) Rangarajan Committee is associated with other economic policy issues, not RBI’s introduction of Basel-linked capital adequacy norms in Indian banking.
  • (C) Tendulkar Committee dealt with poverty estimation, so it does not match a banking-regulation reform on Basel capital adequacy norms.
  • (D) Kelkar Committee dealt with tax reforms, not the banking-sector reforms and CRAR framework associated with the Narasimham Committee.

Concept

This tests banking-sector reforms under the Indian Economy syllabus, especially prudential regulation after liberalisation. It recurs in RAS because committees, Basel norms, NPAs, CRR, SLR and capital adequacy are standard links between financial-sector reform and RBI regulation.

Source

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