Question

The committee which gave the concept of narrow banking in India

• A. Rangarajan committee
• B. Narasimham committee
• C. Tarapore committee
• D. Verma committee

Answer 1

Answer:

C. Tarapore committee

Narrow Banking:

• Narrow Banking refers to limited banking activity.
• In order to avoid bad debts, the banks do only mobilise deposits, lend or invest money with in a particular region or invest in low risk asset like Govt. securities.
• This banks will not provide term loans, Working Capital Loans, Agricultural loans etc.
• Tarapore committee (committee on capital account convertibility) gave the concept of narrow banking in India.
• They do not take any risk and loans are provided on the basis of security.
• It was suggested as a solution of the problem of high NPAs and related matters.
• Narrow banking can ensure the regular deployment of funds in low risk liquid assets.
• This banking system are expected to remove the problems of bank failures and the consequent systemic risks and loss to depositors.