M Narasimham, Father of Indian Banking Reforms, Is No More
Born at Nellore on 3 June 1927 Maidavolu Narasimham, father of financial and banking reforms, breathed last on 20 April 2021. This 94-year-old legend in banking was the only person joining the Reserve Bank of India (RBI) as a research officer in the department of research and statistics, to return as governor of RBI for the shortest period of seven months, after serving the government of India as additional secretary in the department of economic affairs in 1972. He was secretary for banking from where he rose to the position of governor of RBI. 
 
In the words of his mentee, Dr YV Reddy, former governor of RBI, M Narasimham is a ‘gentleman and statesman’. 
 
Former president of India and a philosopher-statesman Dr Sarvepalli Radhakrishan was his grandfather. 
 
He chaired two committees, the Financial Sector Reforms Committee (Narasimham Committee-1) and the Committee on Banking Reforms set up by P Chidambaram in 1997. 
 
In his memoirs, Mr Narasimham, wrote, “My tenure in the Reserve Bank was rather uneventful…My attitude was to carry on hand, to use a maritime expression, to see the ship’s steady as she goes.” 
 
After his short seven-month term as governor of RBI, he served as executive director of both the World Bank and International Monetary Fund (IMF). During his tenure as principal of Administrative Staff College of India (ASCI), he served Asian Development Bank (ADB) as vice-president.
 
Mr Narasimham was an idea-man. 
 
Several of his ideas blossomed into institutions, evolution of Industrial Development Bank of India (IDBI) – an institution generated out of the ‘Cooley funds’ out of PL-480 operations – as a refinancing agency, national credit council, regional rural banks, interest recognition and asset classification norms, the concept of non-performing assets (NPAs), reforms in the balance sheets of banks, resultantly. 
 
He was also credited with the introduction of a trade-weighted basket of currencies to determine exchange rate that lasted till another set of reforms in 1992 when it moved to market determined exchange rate. 
 
In several of my articles on banking, I extensively quoted his unfinished agenda of reforms suggested by him. “Banks have to tone up their skills base by resorting, on an ongoing basis, to later induction of experienced and skilled personnel, particularly for quick entry into new activity and areas. The Committee notes that there has been considerable decline in the scale of merit-based recruitment even at the entry level in many banks.” 
 
He also recommended the unpalatable discontinuance of the practice of recruitment of officers through Banking Services Recruitment Board. 
 
Mr Narasimham also pointed out that banks and financial institutions should avoid the practice of 'evergreening' by making fresh advances to their troubled constituents only with a view to settling interest dues and avoiding their classification as NPAs. By 1992, prudential norms had a shocking impact on banks’ Balance sheets. 
 
He also resisted the dual control of public sector banks (PSBs)– the government and the RBI. He clearly mentioned that the role of owner must be distinct from that of the regulator. He called for dismantling the department of financial services (DFS) in the ministry of finance (MoF). This is yet to happen. 
 
While on mergers, he was very clear that the weak banks should not merge with banks and the former should be given a clear and safe exit. 
 
A few anecdotal references would be in order since I worked with him as dean of studies at ASCI. My eight-year tenure marked a great period of learning in my life.
 
I had the privilege to invite him, when he was chairman of ASCI, to deliver the keynote address on the anniversary day of State Bank Institute of Rural Development (SBIRD) in 1991. 
 
He readily accepted the invitation and delivered the address that focused on the role of farming and rural development in India and the role banks have to play progressively in these areas. 
 
Training the executives of banks and project directors (PDs), district rural development agencies (DRDAs) should be strengthened, he said. 
 
This address led to the SBIRD holding a few programmes for the PDs, DRDAs and bankers together.
 
The second time I met him was, after my retirement from the SBI in 1994, at a marriage. Expressing surprise at my decision to retire and establish a consulting firm, he told me that it was not the age (52 years) for entering consultancy and desired that I should see him the next day at his office. 
 
I saw him as directed and delivered my CV to the principal TL Sankar at ASCI. 
 
Both Mr Narasimham and Mr Sankar etched a new history for the ASCI that was under severe losses by 1991. After observing due process, I was selected as senior faculty in October 1994. 
 
At the time of selection, I was told to organise training programmes for the financial cooperatives (both rural and urban) and the regional rural banks (RRBs), his brainchild. The very next year, I was made the dean of studies, based on my performance.
 
The most interesting and memorable event was designing a training programme for the chief general managers (CGMs) of RBI. 
 
Mr Narasimham called me to his chambers and beckoned me to meet the then RBI governor Bimal Jalan and chalk out the programme. 
 
Since it was to address the reforms in the financial and banking sector, whose chief architect he was, he directed that Dr Mathew Manimala, senior faculty for human resources (HR), and I meet the governor and figure out the RBI requirements in training. 
 
In effect, it was more a change management programme. 
 
The chief general managers till then, being the regulators, always had their word as the last word in all that they said. 
 
After studying the HR practices of RBI for a week, both of us drafted a programme for five days that was discussed with the CGM (HR), and the governor and firmed it up. 
 
Mr Jalan told us that Mr Narasimham knows the needs of this cadre at that point of time better and that the design can be modified in a manner he wished too. 
 
That was how we rolled out two training programmes at ASCI. This was the biggest challenge I could face. It was also the biggest learning experience for me.
 
In 2006-07, I was the editor of Asian Economic Review, a journal of the Indian Institute of Economics under the aegis of Federation of AP Chamber of Commerce and Industry. 
 
Mr Narasimham was the chairman of the editorial board. His directions on acceptance and editing of the accepted articles were great lessons. 
 
He was known for punctuality and sharp wit. He was a man of few words and more of them were directions. An affable person, highly engaged intellectually even till 2018, the last time I met. He lived as a man of the future. 
 
It is difficult to imagine that such a person left us. May his soul rest in peace. 
 
(Dr B Yerram Raju is a former senior executive of SBI and an economist and risk management specialist.)
 
Comments
gopalakrishnan.tv
5 months ago
Very well written by Dr Yerram Raju on Mr Narasimham the father of Financial sector Reforms. The RRBs came into being based on Mr Narasimham's report and they contributed a lot to create awareness about financial literacy and financial inclusion among the bankers ,administrators, regulators and above all the rural beneficiaries themselves. His reports on the Financial system in 1991 and banking system in 1997 brought about a sea change in the entire financial segment and brought it on par with international standards although the recommendations were not fully accepted and implemented fully in letter and spirit. Even after a lapse of 3 decades, some of the recommendations are only under consideration and being debated. He was a visionary ,great thinker and philosopher and his loss has created such a vacuum that cannot be easily filled.
I had interacted with him on two or three occasions during my days in RBI Hyderabad and I have found him to be very simple , approachable and man of all virtues.
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