The Rangarajan Committee was constituted by the Reserve Bank of India (RBI) in 1997 to review the functioning of the Indian financial system and recommend measures for its improvement. The committee was chaired by C. Rangarajan, a former Governor of the RBI. The committee submitted its report in 1998 and made several recommendations, including:
Reduction in the fiscal deficit: The committee recommended that the government reduce its fiscal deficit to bring down the interest rates and create a conducive environment for investment and growth.
Fiscal Responsibility and Budget Management (FRBM) Act: The committee recommended that the government enact the FRBM Act to ensure fiscal discipline and reduce the fiscal deficit.
Financial sector reforms: The committee recommended further financial sector reforms, such as the liberalization of interest rates, the entry of new players, and the strengthening of the regulatory framework.
Banking sector reforms: The committee recommended that the government recapitalize public sector banks, reduce its stake in them, and encourage mergers and acquisitions to improve the efficiency and competitiveness of the banking sector.
Development of the corporate bond market: The committee recommended the development of the corporate bond market to provide alternative sources of financing for companies and reduce their dependence on bank credit.
Development of the secondary market: The committee recommended the development of the secondary market for government securities to improve liquidity and promote price discovery.
Strengthening of the regulatory framework: The committee recommended the strengthening of the regulatory framework for the financial sector by creating an independent regulatory agency and introducing prudential norms.
The Rangarajan Committee report was aimed at improving the macroeconomic environment, promoting financial stability, and stimulating economic growth. The recommendations were focused on fiscal discipline, financial sector reforms, and banking sector reforms.