Which among the following is not one of the famous committees appointed for examining credit limits for commercial banks in respect of working capital requirements ?

Question

Accepted Answer

The correct option is 3:
The **S. S. Vyas Committee** is the exception among the options, as its primary focus was on the structure and delivery of **Rural Credit** in India. The committee was appointed to review the agricultural credit delivery system, a domain distinct from the corporate and industrial working capital finance provided by commercial banks, which the other three committees examined. Its recommendations pertained to issues such as agricultural credit, the review of the rural financing system, and the roles of various institutions in this sector. Hence, it is not associated with establishing norms for commercial bank credit limits for *working capital requirements*.

The incorrect option is 1:
The **K. B. Chore Committee** (1979) was a major committee appointed by the Reserve Bank of India (RBI) to examine the operations of the **Cash Credit System**, the most prevalent method of working capital finance at the time. Its mandate was to review the existing system of controlling and monitoring bank credit. The committee recommended improving the discipline of borrowers and suggested measures for a more systematic appraisal and follow-up of bank credit, directly impacting the process of setting working capital credit limits for commercial banks.

The incorrect option is 2:
The **V. T. Dehejia Committee** (1969) was a pioneering committee in the evolution of working capital credit regulation. It was set up to investigate the issue of **inflated credit requirements** of trade and industry. The committee's work highlighted the need for commercial banks to enforce greater financial discipline and critically examine the credit needs of their industrial borrowers. Its findings and recommendations were instrumental in initiating the process of scrutinizing and regulating bank credit for working capital.

The incorrect option is 4:
The **Prakash Tandon Committee** (1975) is one of the most significant committees in the history of working capital finance in India. This committee, officially the Study Group to Frame Guidelines for Follow-up of Bank Credit, introduced the concept of **Maximum Permissible Bank Finance (MPBF)**. The MPBF formula was a direct, prescriptive tool for commercial banks to calculate and restrict the extent of bank credit that could be provided for working capital, making it a definitive authority in examining and setting credit limits.