Committees on Banking Sector Reforms

P.J. Nayak Committee 

• The Reserve Bank of India (RBI) constituted the P.J. Nayak committee in 2014 to review the governance of the Board of Banks in India. 
• The Committee was presided by P J Nayak and its major recommendations are : 

1. The Bank Nationalization Act, the SBI Act, and the SBI Subsidiaries Act should all be abolished (1970, 1980). This is the case since the terms of these statutes require the government to possess more than 50% of the banks.
2. The government should establish a Bank Investment Company (BIC) as a key investment company for holding equity holdings in banks it already owns. 
3. Bank Investment Company should be incorporated under the Companies Act 2013.  
4. This BIC will receive the government’s stake in banks. As a result, the BIC would take over the role of parent holding company for all of these national banks, with the banks becoming subsidiaries of the BIC. BIC will be a self-governing organisation with the authority to appoint its own Board of Directors and make other important policy choices. 
5. The Bank Boards Bureau (BBB), a temporary organisation, will handle the BIC’s numerous functions until the BIC is formed. Once BIC is established, the BBB will be phased out. 
6. The BBB will advise on board appointments, as well as the chairman and other executive directors of financial institutions. 
7. The Government should consider decreasing its holding in public sector banks to less than 50%, in order to restore a level playing field for different public sector banks.

Nachiket Mor Committee 

• The “Committee on Comprehensive Financial Services for Small Businesses and LowIncome Households” was set up by the RBI under the chairmanship of Nachiket Mor. 
• The committee was tasked with developing a clear vision for India’s financial inclusion and deepening. 
• Committee has outlined six vision statements for full financial inclusion and financial deepening in India: 

1. Universal Electronic Bank Account (UEBA): Every Indian citizen over the age of eighteen will be provided with their own full-service, safe, and secure electronic bank account. 
2. Ubiquitous Access to Payment Services and Deposit Products at Reasonable Charges: According to the Committee, every Indian resident should be within fifteen minutes walking distance of a payment access point. 
3. Sufficient Access to Affordable Formal Credit: Every low-income family and small business would have access to a formally regulated lender who could assess and meet their financial requirements. Such a lender must also be able to provide them with a comprehensive selection of appropriate credit products at a reasonable cost. 
4. Universal Access to a Range of Deposit and Investment Products at Reasonable Charges: Every low-income family and small business would have access to providers who could provide them with appropriate investment and deposit solutions. They must be able to access such services at a reasonable cost. 
5. Universal Access to a Range of Insurance and Risk Management Products at Reasonable Charges.

• The committee’s key recommendations are as follows: 

1. The fast growth of bank accounts will be fueled in large part by Aadhaar. 
2. At the district level, deposits and advances as a percentage of gross domestic product (GDP) are tracked. 
3. Adjusted the priority sector lending target to 50%, with sector and region adjustments based on lending difficulty.