Narasimham committee report- some further ramifications and suggestions

Abstract

This paper while agreeing with the general thrust of the Narasimham committee report. Calls attention to some logical corollaries of the report and analyses some possible fall-out from implementing the Report . We agree with the view that control of banking system should be under an autonomous body supervised by the RBI. However at the level of individual banks, closer scrutiny of lending procedures may be called for than is envisaged in the Report. In a freely functioning capital market the potential of government bonds is enormous, but this necessitates restructuring of the government bond market. The government bonds may then also be used as suitable hedging mechanisms by introducing options and futures trading. We recommend freeing up the operation of pension and provident fund to enable atleast partial investment of such funds in risky securities. On account of inter dependencies across different policies, any sequencing of their implementation may be highly problematic. We therefore suggest a near simultaneity in the implementation of various reforms in order to build up a momentum which would be irreversible if people are to have confidence that the reforms will endure, and if we are to retain our credibility with international financial institutions.