Government Sets Up the High Level Committee on Banking for Viksit Bharat

The Narasimham Committees were two expert committees, headed by former RBI Governor M. Narasimham, that designed India's banking reforms after 1991. The first committee (1991) looked at the whole financial system and the second (1998) reviewed how those reforms had gone and what should come next. Together they changed Indian banking from a tightly controlled, government-directed system into one that runs on prudent rules, competition and market-linked interest rates. Many rules that banks follow today, such as the capital adequacy ratio and the way bad loans are classified, came from these committees.

Priority Sector Lending (PSL) is a rule of the Reserve Bank of India (RBI) that tells banks to give a fixed share of their loans to sectors that are important for the country but often find it hard to get bank credit. These include farmers, small businesses, students, poor households and the weaker sections of society. For most commercial banks, this share is 40% of their lending. If a bank misses its target, it must put the shortfall into low-return government funds. PSL is one of India's main tools for making sure bank credit reaches people beyond big companies and cities.

Public sector banks (PSBs) are banks in which the Government of India owns more than half of the shares. India has 12 of them today, including the State Bank of India and Punjab National Bank. They grew out of the bank nationalisations of 1969 (14 banks) and 1980 (6 banks). After a large bad-loan crisis in the 2010s, the government followed a "4R" strategy: Recognition, Resolution, Recapitalisation and Reforms.