Which committee recommended the shift from administered interest rates to market- determined rates in India?
Narasimham Committee I (1991)
Before 1991, India's banking sector operated under a regime of administered interest rates, where the government and RBI fixed deposit and lending rates rather than letting the market set them. This was widely seen as inefficient and a drag on financial-sector growth.
The Narasimham Committee I (1991), chaired by former RBI Governor M. Narasimham, was set up in the wake of the 1991 balance-of-payments crisis to recommend financial-sector reforms. Among its key proposals were deregulating and moving toward market-determined interest rates, reducing the SLR and CRR, phasing out directed credit, and strengthening bank capital adequacy and prudential norms.
The other bodies addressed different areas: the Kelkar Committee (2002) focused on tax reform, the Rangarajan Committee dealt with matters such as the balance of payments and disinvestment, and the Chelliah Committee (1991) recommended tax-system reforms. Hence the shift from administered to market-determined interest rates is credited to the Narasimham Committee I (1991).
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