Corporate Governance in Indian Banking Sector: Issues and Concerns

Abstract

The thrust for greater transparency towards stakeholders of the business has led to the emergence of the concept of Corporate Governance, which was a response to corporate failures and widespread dissatisfaction with the way many corporate function, has become one of the wide and deep discussions across the business sectors as a global phenomenon. The founding principles of corporate governance lays emphasis primarily hinges on complete transparency, integrity and accountability of the management. There is also an increasingly greater demand on investor interests and public orientation. The issue of corporate governance has come up mainly in the wake up economic reforms characterized by liberalization and deregulation. Corporate governance has at its backbone a set of transparent relationships between an institution’s management its board, shareholders and other stakeholders. The corporate governance philosophy of banks is the pursuit of sound business ethics and strong professionalism that aligns the interests of all stakeholders and the society. This paper discusses the corporate governance of banking institutions in developing economies. This is an important issue given the essential role that banks play in the financial systems of developing economies and the widespread banking reforms that these economies have implemented. Based on a theoretical discussion of the corporate governance of banks, we suggest that banking reforms can only be fully implemented once a prudential regulatory system is in place.