Janakiraman Committee Report

The Janakiraman Committee was set up in 1992 shortly after the Goiporia committee in 1990. This committee was set up to investigate the number of market irregularities that had cropped up and were severely harming the banking system in the country. The Janakiraman Committee Report was the creation of the committee. The Committee was also responsible for discussing the repo that had been created in the Indian market. The Janakiraman Committee Report discussed all these aspects and contained the reasons for these irregularities. The repo rates and their growth were unnatural and alerted the RBI fearing some undesirable financial growth. 

Janakiraman Committee Report

The Janakiraman Committee report found that the market condition was ripe for unregulated changes in the repo rates every wholesale participant was using the repos to carry out financial transactions. Banks were allowed to enter into particular buy-back arrangements with the government or other banks. However, the approved securities had to be maintained following strict guidelines. The Janakiraman Committee Report found out that some banks were understating the actual liabilities by using repos. And these banks were asking for money from non-bank actors through the method of repos. The Janakiraman Committee Report also found that some financial institutions would borrow the repo funds and then invest the same. 

Janakiraman Committee

The Janakiraman Committee was set up by the RBI after it became alarmed by the irregularities in the economic market conditions of the country starting in 1988. The RBI appointed the Janakiraman Committee in 1992 to find out the reasons for these irregularities and provide recommendations to deal with these irregularities. The Chairman of this committee was the Managing Director, S. Janakiraman. This committee was formed with the expressed purpose of assisting the second body of the Regulatory Review Authority. All such pertinent information is available on the main webpage of the RBI. The committee was to hand over periodic reports to the RRA. 

Recommendations of the Janakiraman Committee

The Recommendations of the Janakiraman Committee were as follows:

• The first thing that the Committee recommended was to update the terms of the Issue of PSU that must be based on the market conditions. These bonds should be listed on the regular stock market or the OTCEI (over-the-counter exchange).
• Interests distortions needed to be avoided through a review of tax-free bonds
• An open market must be created and regulated for various PSU bonds with fixed securities. a reliable market price must also be regulated. 
• Re-evaluation of the Unit Scheme of 1964
• Ready Purchase Operations must be regulated to avoid the misuse of Repo. 
• Another useful recommendation was to restrict and limit the allowance of actors who could use the repo transactions. It was recommended that financial institutions, banks, and mutual funds were permitted to use it. 

List of Committee

There have been over 50 committees that were formed to address banking sector problems and to introduce certain reforms in the banking system. The list of Committee is exhaustive and numbers around 52. There were many RBI members in the Janakiraman Committee along with non-RBI members as well. Three non-RBI members were assisting the RRA. Notaboe’s names are R. Janakiraman and Y.H. Malegam. 

Conclusion

The Janakiraman Committee Report also found that the participants using drops were not just the banks but other actors as well. There was a prohibition on the use of reports and despite that, many were using them. Repo or repurchase agreements are borrowing from the government for a short term through buying government securities.