| dc.description.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
fallout 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
at least partial investment of such funds in risky securities.
In the corporate sector, we believe that the current 2:1 debt equity norm is too high and
not sustainable in the long term. We envisage that high debt levels and higher interest
rates, combined with higher business risk may result in greater incidence of corporate
sickness. This may call for various schemes for retrenched workers and amendment to
land laws for easy exit of companies.
On account of interdependencies 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. | en |
