Financial Awareness - Risk, Stability & Emerging Finance
The Second Narasimham Committee emphasized the need for recapitalization of banks primarily to address which issue?
The Second Narasimham Committee emphasized the need for recapitalization of banks primarily to address which issue?
medium Q15 of 15
Step-by-Step Solution
Step 1: Understand the focus of the Second Narasimham Committee
The committee was tasked with strengthening banking regulation, especially tackling NPAs and improving financial health.Step 2: Analyze why recapitalization was needed
Recapitalization was necessary to strengthen banks' balance sheets weakened by high NPAs, not due to liquidity, FDI, or digital payments.Final Answer:
High levels of Non-Performing Assets (NPAs) → Option AQuick Check:
Second Narasimham Committee = recapitalization due to NPAs ✅
Quick Trick: Link recapitalization with NPAs for Narasimham 2.
Common Mistakes:
- Confusing recapitalization reasons with liquidity or unrelated reforms.
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