Which policy reform targeted improving competitiveness and efficiency of the banking system after 1991?
Show answer & explanation
Correct answer: A
Explanation
Answer: Introduction of prudential norms and CRAR
Explanation: After the 1991 economic reforms, India undertook major banking sector reforms to improve efficiency, transparency, and competitiveness. One key reform was the introduction of prudential norms and Capital to Risk-Weighted Assets Ratio (CRAR). These measures strengthened the financial health of banks by ensuring adequate capital, better risk management, and reduced non-performing assets.
These reforms were part of the recommendations of the Narasimham Committee.
Additional Key Points:
1991 Economic Reforms of India marked the beginning of liberalization in India.
CRAR ensures banks maintain sufficient capital against risky assets.
Prudential norms include income recognition, asset classification, and provisioning.
These reforms improved banking stability and global competitiveness.
Led to modernization and adoption of Basel norms in India.
Question: What is the purpose of prudential norms in banking?
Answer: To ensure financial stability and reduce NPAs
Question: What major economic event took place in India in 1991?
Answer: Economic liberalization reforms