Corporate Governance: A Relook into the Indian Banking System

Abstract

The paper proposes to emphasise on the standard theories of corporate governance. It would highlight the unique problems facing corporate governance of financial intermediaries and blends this theoretical perspective with observations made in global context. The paper brings forth the aspect of agency theory that explains the corporate governance problem in terms of how equity and debt holders influence managers to act in the best interests of the providers of capital. This aspect finds absolute relevance in the management of public sector banks in India. This paper comes in the wake of certain policy measures that the central bank is likely to adopt in days to come. With the objective of having fewer number of bigger public sector banks in coming days, the need to study the importance and relevance of corporate governance issues pertaining to public sector banks needs no further emphasis. The paper deals with some of those issues. The organisation of the paper would be as follows: 1. A general introduction to corporate governance with added emphasis on the same in the banking and financial sector 2. A brief literature survey on the topic with added attention on: (i) A survey of corporate governance: Andrei Shleifer & Robert W. Vishny the journal of finance (ii) The Governance of the New Enterprise: Raghuram G. Rajan and Luigi Zingales (iii) ICRA Corporate Governance Survey: 2004 (iv) Necessity of Government intervention in banks 3. Core areas to be addressed in corporate governance 4. Corporate Governance and the Indian Banks with focus on the public sector entities.