The concept of corporate governance, which emerged as a response to corporate failures and widespread dissatisfaction with the way many corporates function, has become one of the wide and deep discussions across the globe recently. It primarily hinges on complete transparency, integrity and accountability of the management. There is also an increasingly greater focus on investor protection and public interest. Corporate governance is concerned with the values, vision and visibility. It is about the value orientation of the organisation, ethical norms for its performance, the direction of development and social accomplishment of the organisation and the visibility of its performance and practices.
Indian Banking Industry
Indian banking has around 200 years of history and has undergone many transformations since independence. But, Liberalisation, Privatisation and Globalisation and Information Technology are currently changing the Indian banking radically.
Earlier, banking was virtually a monopoly of the public sector banks with full protection from the State. But the process of reforms in the Indian banking system has thrown them out to more liberal and free market forces. Now the banks, more particularly the public sector ones, feel the real heat of the competition. The interest General hashtag linkage to COVID-19 Pandemic rate cuts, dwindling margins and more number of players to serve a reduced number of bankable clients have all added to the worries of the banks. The customer has finally come to hold the center stage and all banking products are tailor-made to suit his tastes and preferences. This sudden change in the banking environment has bereaved the banks of all their comforts and many of them are finding it extremely difficult to cope with the change.
Need for Corporate Governance in Banks
o Since banks are important players in the Indian financial system, special focus on the Corporate Governance in the banking sector becomes critical.
o The Reserve Bank of India, as a regulator, has the responsibility on the nature of Corporate Governance in the banking sector.
o To the extent that banks have systemic implications, Corporate Governance in the banks is of critical importance.
o Given the dominance of public ownership in the banking system in India, corporate practices in the banking sector would also set the standards for Corporate Governance in the private sector.
o With a view to reducing the possible fiscal burden of recapitalising the PSBs, attention towards Corporate Governance in the banking sector assumes added importance.
Prerequisites for Good Governance
There are some pre-requisites for good corporate governance. They are:
o A proper system consisting of clearly defined and adequate structure of roles, authority and responsibility.
o Vision, principles and norms which indicate development path, normative considerations and guidelines and norms for performance.
o A proper system for guiding, monitoring, reporting and control.