The Narasimham Committee for Financial Sector Reforms has suggested reduction in

The Narasimham Committee (1991) explicitly argued that SLR should be determined by prudential requirements rather than used as a major financing tool for the government, implying a phased reduction in SLR levels [1]. The committee arose in response to very high pre‑1991 SLR and CRR requirements that had locked up bank resources, and subsequent literature shows these ratios were targets for reduction to improve bank productivity and liquidity [2]. Moreover, the Committee recommended phasing out directed credit programmes and scaling down priority sector obligations (including concessional interest rates), effectively reducing priority sector financing mandates alongside lower SLR and CRR requirements. Hence option 2 correctly captures its trio of reduction recommendations.

Sources

1. [1] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 3: Money and Banking - Part II > 3.1 History of Indian Banking and Reforms > p. 127
2. [2] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 3: Money and Banking - Part II > 3.1 History of Indian Banking and Reforms > p. 126