HYDERABAD, December 20: Finance minister P Chidambaram on Saturday announced the setting up of a second banking sector reforms committee to review the implementation of the recommendations of the earlier committee and to take corrective measures if required.

The committee will be headed by former RBI governor and currently chairman of ASCI, M Narasimham. Chidambaram announced this while inaugurating the platinum jubilee celebrations of the Andhra Bank here.

When contacted, Narasimham said that the committee would review the status of reforms so far. Though the terms of the new committee are yet to be formulated, he said that there was a lot more that needed to be taken care of on the banking reforms front.

Chidambaram said that the committee would be constituted on Monday and it will present its report by March to the new government.

Commenting on the pace of banking reforms, the finance minister said the United Front government had carried forward the reform programme particularly where the banking sector was involved. Citing the example of Thailand, where the economic reforms programme received a positive response due to the prevalent sound banking system there, Chidambaram felt that that kind of a model may be adopted in India in a bid to derive favourable results from the economic reforms.

He said that the Gujaral government has kept its promise made in the common minimum programme (CMP) as there is an outflow of Rs 6,600 crore towards rural credit. Further, the Nabard has advanced Rs 5,500 crore during the year 1996-97 and Rs 5,700 crore in 1997-98 as part of the refinance scheme. Under RIDF II, the government has spent about Rs 5,000 crore and Rs 7,500 crore respectively for both the years.

He said that the post-reform period witnessed a progressive move to government borrowing at market-related interest rates which had resulted in a significant reduction in statutory liquidity ratio (SLR) from 38.5 per cent in 1991-92 to 25 per cent in a phased manner by 1997-98.

Similarly, cash reserve ratio was also reduced from 15 per cent to 10 per cent during the same period, he said, adding that further reduction in SLR and CRR, though desirable, should be viewed in the light of the emerging environment conducive to rapid economic growth with reasonable price stability.

Chidambaram said that there was still a need for reforms to facilitate, inter alia, development of the domestic debt market and wider participation in money market by public financial institutions.

In his welcome address, the bank chairman and managing director G Narayanan said that the total business of the bank has crossed the Rs 10,000-crore mark. The Andhra Bank has become the second highest amongst nationalised banks in terms of capital adequacy ratio with 12.05 per cent and NPA with 4.10 per cent, he said.

According to him, the bank will attain autonomy by March after fulfilling all the requirements. The bank has net owned funds of over Rs 345 crore, he said.

Hinting that the bank will enter the capital market, Narayanan said that it will fully wipe out the accumulated losses by the end of the current year. During 1996 the bank posted a profit of Rs 11 crore and in 1997 it declared a profit of Rs 36 crore.Eight PSU banks to get full autonomy in 1998

About 8 to 11 nationalised banks in the country would be accorded full autonomy during 1998 to ensure speedier economic growth, finance minister P Chidambaram said.

He said autonomy would be given to the banks which had fulfilled four requirements including posting profits for three years in succession. Andhra Bank, which had met three of the four requirements except the profit part, was one among the banks proposed to be given autonomy.

Chidambaram said as finance minister he had always believed in giving more autonomy to the Reserve Bank of India so that it could formulate monetary policy effectively to contain inflation.

Similarly, he said the Life Insurance Corporation and the General Insurance Corporation were also being given autonomy. The finance minister said he was looking forward to the day when the states would also be given full financial autonomy.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.