M Narasimham wasn’t governor of the Reserve Bank of India for long. Just seven months. Neither did his most enduring contributions come during that brief period. Yet, his name will forever be linked to the trajectory of the Indian financial sector for, among other things, his two-part report on banking sector reforms, which suggested steps that India continues to debate till date.
Narasimham passed away on April 20. He was 94.
He served as governor between May and November of 1977 and had been appointed in an interim arrangement before IG Patel took over the post. Narasimham was the first and only governor to be appointed from the Reserve Bank cadre, according to the central bank’s website. He joined the Bank as a research officer in the economic department.
Narasimham later served as executive director for India at the World Bank and thereafter at the International Monetary Fund.
“While he was a stopgap appointment as RBI Governor before IG Patel, Mr. Narasimhan later contributed immensely in securing India’s largest IMF support package in 1981 as India’s executive director,” said Rahul Bajoria, chief India economist at Barclays and author of “The Story Of The Reserve Bank of India”.
The 1981 package had become necessary against the backdrop of high inflation, a drought and diminished foreign exchange reserves, according to RBI History Volume-3. In October that year, India had to secure a loan from the extended financing facility of the International Monetary Fund. “This was arranged for in November of 1981 and, helped by a good monsoon and sensible monetary policies, the crisis was a thing of the past by the beginning of the next financial year,” the RBI History said.
During his years at the RBI, Narasimham was involved in a number of panels related to banking infrastructure.
In 1975, a committee headed by him looked into the feasibility of setting up new rural banks as subsidiaries of public sector banks to cater to the needs of the rural people. The regional rural banks that still dot India’s banking landscape were a result of this work.
In 1997, he appointed a committee to study the impact of branch expansion since the bank nationalisation of 1969 and “to suggest the future course of action keeping in view the need for rural development and removal of regional imbalances,” the history volume says.
In his short tenure as governor, Narasimham also saw the Indian banking system transition towards the bifurcation of savings deposits into demand liabilities and time liabilities. This, according to the history volume, eventually led to “more meaningful concepts of money supply into those that consisted of interest-bearing assets as against those that did not.”
Like many other governors, he too finds his signature of the country’s currency notes. The one rupee note bears his signature, although it’s no longer in circulation.