Former Reserve Bank of India (RBI) governor M. Narasimham passed away on Tuesday at a Hyderabad hospital following covid-related illness. He was 94.
Narasimham is the only governor to be appointed from the Reserve Bank cadre. He was the 13th governor of RBI and served a short tenure of seven months between May and November 1977, before he was succeeded by I.G. Patel.
Narasimham joined RBI as a research officer in the economics department. He later joined the government and prior to his appointment as governor, he served as additional secretary, department of economic affairs.
Narasimham was at the helm only for a short time, but his tenure was marked by some interesting events.
According to RBI History Volume 3, during Narasimham’s tenure, then finance minister H.M. Patel was in Mumbai when the 1977 credit policy was announced. He took the opportunity to address the chief executives of major banks at the RBI headquarters. “This had never happened before. The bank was rife with speculation as to the significance of this. What did it really mean? The puzzle was never solved and no comments were made on the auto-nomy of the bank in the press or in the academic writings of the time,” the book says.
Later, Narasimham served as executive director for India at the World Bank and the IMF, after which he was secretary in the finance ministry.
Much of what India’s financial sector landscape is today can be attributed to the seminal work done by two committees that Narasimham chaired: the Committee on Financial System (CFS) 1991 and the Committee on Banking Reforms 1998. The CFS was set up by then finance minister Manmohan Singh as part of the overall economic reforms.
The committee on banking sector reforms recommended the dilution of government equity in nationalized banks to 33% and suggested that the RBI nominees on bank boards step down. It also recommended a phased reduction in the Statutory Liquidity Ratio to 25% over five years.
Narasimham is also credited with recommending the setting up of regional rural banks (RRBs) as subsidiaries of public sector banks. “Narasimham was a brilliant mind, fantastic draftsman and visionary overall. He wrote the RRB report in 1976 in one day,” reminisced a former RBI deputy governor.