The correct answer is option 4. Explanation & Key Takeaways: • Narasimham is the most powerful banker of India post-independence. The way his reports – Narasimham Committee on Financial System (1991) and the Narasimham Committee on Banking Sector Reforms (1998) transformed the functionality of the Indian Banking sector is commendable • He is also known for pioneering historical events such as bank mergers, asset reconstruction firms and the emergence of new-generation private banks. • Recommendations of Narasimham Committee II:- • The Committee suggests that pending the emergence of markets in India where market risks can be covered, it would be desirable that capital adequacy requirements take into account market risks in addition to the credit risks. • There is an additional capital requirement of 5% of the foreign exchange open position limit. Such risks should be integrated into the calculation of risk weighted assets. The Committee recommends that the foreign exchange open position limits should carry a 100% risk weight. • Introduction of the norm of 90 days for income recognition in a phased manner. • Banks have been advised to take effective steps for reduction of NPAs and also put in place risk management systems and practices to prevent re-emergence of fresh NPAs. Banks are permitted to issue bonds for augmenting their Tier II capital. Guarantee of the Govt. for these bonds is not considered necessary. • The public sector banks have been permitted to recruit from the open market or by way of campus recruitment, skilled personnel in areas like information technology, risk management, treasury operations, etc.