In 1991, the Narasimham Committee made which of the following recommendations?

Concept: The Narasimham Committee (1991), headed by M. Narasimham, was set up to recommend reforms to India's financial and banking system as part of the post-1991 liberalisation. Its central thrust was to reduce direct government/administrative control over banks, increase competition and efficiency, and strengthen prudential regulation — not to tighten controls or restrict new entrants.

Application: Consistent with this pro-liberalisation thrust, the committee recommended permitting new banks to be set up in the private sector, to compete with public sector banks on an equal footing. This recommendation was implemented through RBI's 1993 guidelines for licensing new private banks, which led to the entry of banks such as ICICI Bank and HDFC Bank.

Contrast: The other proposals run counter to the committee's actual direction:

• Restricting FDI in banking — the 1991 report's recommendations centred on domestic prudential and structural reform (capital adequacy, income recognition, reserve ratios); FDI ceilings in banking were set through separate policy decisions in later years, not by this committee.

• Full government control over all banks — the committee's central thrust was to reduce government/administrative control over banks and grant them greater operational autonomy, the direct opposite of imposing full control.

• Raising CRR and SLR — the committee recommended a phased reduction of both ratios (SLR brought down toward 25%, CRR progressively lowered) to free up funds for productive lending, not an increase.

Cross-check: This is corroborated by the subsequent policy action — RBI actually licensed new private banks in 1993–94 following the committee's report, confirming that permitting private-sector entry (not restricting FDI, tightening control, or raising reserve ratios) was the committee's recommendation.