The first Narasimhan Committee (Committee on the Financial System) was appointed in 1991 and the second one (Committee on Banking Sector Reforms) was appointed by in1997.

• Subsequently, the first one widely came to be known as the Narasimham Committee-I (1991) and the second one as Narasimham-II Committee(1998).
• The purpose of the Narasimham-I Committee was to study all aspects relating to the structure, organisation, functions and procedures of the financial systems and to recommend improvements in their efficiency and productivity
• The Narasimham-II Committee was tasked with the progress review of the implementation of the banking reforms since 1992 with the aim of further strengthening the financial institutions of India.

o  It focussed on issues like size of banks and capital adequacy ratio among other things.

•   Autonomy in Banking

• Greater autonomy was proposed for the public sector banks in order for them to function with equivalent professionalism as their international counterparts

•   Reform in the role of RBI

• RBI withdraw from the 91-day treasury bills market and that interbank call money and term money markets be restricted to banks and primary dealers
• A segregation of the roles of RBI as a regulator of banks and owner of bank

•   Stronger banking system

• Merger of large Indian banks to make them strong enough for supporting international trade
• A three tier banking structure in India through establishment of three large banks with international presence, eight to ten national banks and a large number of regional and local banks.
• A reduction in SLR, CRR and priority sector financing reducing it from 40% to 10%.

•   Non-performing assets

• 'Priority sector lending' was leading to the buildup of non-performing assets of the banks and thus it recommended it to be phased out.
• The need for 'zero' non-performing assets for all Indian banks with International presence.
• Asset Reconstruction Companies to take over the bad debts of banks, allowing them to start on a clean-slate

•   Capital adequacy and tightening of provisioning norms

• The committee targeted raising the capital adequacy ratio to 9% by 2000 and 10% by 2002 and have penal provisions for banks that fail to meet these requirements
• For asset classification, the Committee recommended a mandatory 1% in case of standard assets and for the accrual of interest income to be done every 90 days instead of 180 days

•   Entry of foreign banks

• The foreign banks seeking to set up business in India should have a minimum start-up capital of $25 million as against the existing requirement of $10 million.
• It said that foreign banks can be allowed to set up subsidiaries and joint ventures that should be treated on a par with private banks.

•   It means financing to those sectors of the economy which may not otherwise receive timely and adequate credit.

•   This is essentially meant for an all-round development of the economy as opposed to focusing only on the financial sector.

•   Priority Sector are those sectors which the Government of India and Reserve Bank of India consider as important for the development of the basic needs of the country and are to be given priority over other sectors.

•   The priority sectors include Agriculture, Micro, Small and Medium Enterprises, Export Credit, Education, Housing, Social Infrastructure, Renewable Energy etc.