M Narasimham, who set the intellectual framework for banking reforms in India, passes away

Narasimham will be remembered most of all for his two iconic reports in 1991 and 1998 that laid the intellectual framework for the banking sector reforms.

COVID-19 has undeniably taken a heavy toll but for those in the banking and the financial sector in India the passing away of M Narasimham on Tuesday morning in Hyderabad due to COVID is a setback that will be felt for long. The former governor of the Reserve Bank of India, Narasimham, will be remembered most of all for his two iconic reports in 1991 and 1998 that laid the intellectual framework for the banking sector reforms and the strengthening of the financial system in India.

Born on June 3, 1927 and residing in Hyderabad, Narasimham was soon to turn 94. Thought leaders and senior bankers were all saddened to learn about the passing of Narasimham and recalled the indelible impact he had made in his lifetime.

Dr C Rangarajan, economist and the former governor of the Reserve Bank of India, feels Narasimham will always be remembered for his seminal contribution to the banking sector. “His contribution has been throughout his career but the crowing piece of his achievement was the recommendations he made in order to reform the banking system and get it in tune with the changes announced as part of the liberalization programme in 1991.” Narasimham, he says, “really wanted to make the banking system more efficient, financially healthy and more competitive.” It led to major initiatives like the introduction of the prudential norms in the banking system to make the banks financially sound.

Seeing M Narashimham as “one of the most influential central bankers that India has had,” Duvvuri Subbarao, a veteran economist, banker and the former governor of the Reserve Bank of India, tells Financial Express Online: “even till date his two reforms are often referred to and is an indication of the rich legacy he has left behind.” Though, Narasimham was the RBI governor in 1977 and therefore much ahead of Subbarao’s time as the RBI governor and therefore not leaving much scope for Subbarao to engage closely with Narasimham professionally but he does remember the time when Subbarao as the governor of the RBI invited Narasimham to speak at an event organized by the RBI as part of its platinum jubilee celebrations. “I still remember the sharp and pragmatic comments on capital account convertibility that Narasimham made even long after he had left the RBI,” says Subbarao.

Professor M S Sriram, who chairs the Centre for Public Policy at the Indian Institute of Management, Bangalore (IIMB), an expert on financial inclusion and one who has looked closely at the evolving banking sector over years, feels sad that “the agenda of the banking sector reforms that Narasimham suggested way back in 1991 remain unfinished.” His two reports – one on the reforms in banking sector and the other to strengthen the financial system, Sriram says, “are so deeply etched in the discourse of the banking sector in India that no discussion in the banking sector reforms happens without referring to the Narasimham I and II reports and these still remain the go-to reports in the financial sector.”

Narasimham has had an illustrious career after starting out as a bright student at the Presidency college, Madras, and later at the St. John’s College, Cambridge. He returned to India in 1950s and was part of a group of young and bright economists at the Reserve Bank of India. The others young and in their mid 20s back and his contemporaries were Anand Chandavarkar,  Deena R Khatkhate and Dharma Kumar. Later, Narasimham moved to Delhi but then back to Mumbai as the governor of the RBI in 1977, back once again to Delhi and eventually heading for the  Asian Development Bank (ADB), Manila as its vice-president.

Jairam Ramesh, economist and Congress MP in his tweet describes Narasimham as a man who “combined seriousness of intellectual purpose with a wonderful sense of humour and great wit.” Incidently, Jairam Ramesh reminds, “Narasimham was the grandson of Dr Sarvepalli Radhakrishnan and nephew of that outstanding historian Sarvepalli Gopal.”

M Narasimham is survived by his son Radhakrishna (Sasha) Narasimham, who recently retired from the ADB.