Corporate Governance Practices of Indian Public Sector and Private Sector Banks

Author(s)

Jatinder Kaur and Ashish Pareek

Affiliations

1. Department of Humanities & Applied Sciences T R Abhilashi Memorial Institute of Engineering & Technology, Tanda, Mandi (Himachal Pardesh)
2. Department of Management Studies, Maharshi Dayanand Saraswati University, Ajmer, Rajasthan

Abstract

Banks play a major role in providing credit to the productive sectors of the economy as well as act as facilitators of financial inclusion and foremost source of employment. Whereas, the Banking Sector Acts as catalysts in promoting the growth of economy, these also possess the capability to cause calamity to an economy. Well governed banks have the ability to cope up with risk associated with them and benefit to the economy. The present study is an attempt to investigate the Corporate Governance practices being adopted by the Indian Public Sector Banks and Private Sector Banks. For this purpose, two Public Sector Banks and Private Sector Banks have been selected taking into account the top banks in the BSE 100 index ranked on the basis of market capitalization. In order to study the quality of Corporate Governance practices of the banks, an assessment tool – Corporate Governance Disclosure Index (CGDI) has been developed. The data has been collected from the annual reports of the banks from the financial year 2002 to 2014. Further, to investigate the difference in both the sector banks, student’s t-test has been applied. The findings of the study reveal that both the sector banks have significant difference with respect to Board related parameters, Remuneration Committee sub-index and Non- Mandatory sub-index.

Keywords

Corporate Governance, Corporate Governance Disclosure Index

References

1. Brahmbhatt, M., Patel, R., & Patel, S. (2012). An Empirical Investigation of Corporate Governance Scenario in Public vs Private banks in India. International Journal of Marketing, Financial Services & Management Research, 1(10), 10-28.
2. Brown, L. D., & Caylor, M.L. (2006). Corporate Governance and Firm Valuation. Journal of Accounting and Public Policy, 25, 409–434.
3. Cheung, Y-L., Jiang,P. & Tan, W. (2010). A transparency Disclosure Index measuring disclosures: Chinese listed companies. J. Account. Public Policy, 29, 259–280.
4. Chilumuri, S.R. (2013) Corporate Governance in Banking Sector: A Case Study of State bank of India. IOSR Journal of Business and Management, 8 (1), 15-20.
5. Deb, R. (2013). Corporate Governance Practices in Idnian Banks. Journal of Business Management & Social Sciences Research, 2(5), 36-50.
6. Fernando, A.C. (2012), Corporate Governance, Pearson ed., New Delhi
7. HDFC (2014). Corporate Governance. Retrieved from HDFC Bank: http://www.hdfcbank.com/ aboutus /cg/ Corporate_Governance.htm
8. ICICI. (2014). Investor Relations. Retrieved from ICICI Bank: http://www.icicibank.com/ aboutus/annual.
9. IDRBT (2004). Governance Issues in Banking. Retrieved on Sept 02 2014 from www.idrbt. ac.in/.../ Governance%20Issues%20in%20 Banking-asci.doc.
10. Katrodia, A. (2012). Corporate Governance Practices in the Banking Sector. Abhinav journal of research in Commerce and Management, 1(4), 37-44.
11. Kaur, J., Pareek, A., & Upadhaya, G. (2014). Corporate Governance: An Indian Perspective on Disclosure and Transparency Issues. Journal of Contemporary Research in Management, 9(2).
12. Kumar, N., & Singh, M. (2015). An Analysis of Corporate Governance Practices in Banking Sector with reference to State Bank of India and HDFC Bank. Acme International Journal of Multidisciplinary Research, 3(2), 142-147
13. Mehran, H., & Mollineaux, L. (2012). Corporate Governance of Financial Institutions. Federal Reserve Bank of New York Staff Reports, no. 539
14. Mishra, R.K., & Rao, N.R. (2013). Report of Priority Areas for Reforms of Corporate Governance in Indian Banking Sector. Hyderabad: NFCG and IPE.
15. Nasha, A. (2008). Does Foreign Direct Investment Really Improve Corporate Governance? Evidence from Thailand. Discussion Paper DP/03/2008.
16. Punjab National Bank (2014). Investor Information. Retrieved from Punjab National Bank: https://www.pnbindia.in/En/ui/Investor- info.aspx
17. Reddy, Y.V. (2002). Public Sector Banks and The Governance Challenge: Indian Experience. RBI Bulletin.
18. Reddy, Y.V. (2005). Banking Corporate Governance in Banks in India. Speech at IIM Banglore. Mumbai.
19. Sarkar, J., & Sarkar, S. (2012). Corporate governance in India. SAGE Publications India.
20. Sarkar, J., Sarkar, S., & Sen, K. (2012). A Corporate Governance Index for Large Listed Companies in India. Working Paper-2012-009. Mumbai: Indira Gandhi Institute of Development Research.
21. State Bank of India. (2014). Corporate Governance. Retrieved March 14, 2014, from State Bank of India – The Banker to Every Indian: http://www.sbi.co.in/portal/web/ corporate-governance/corporate-governance
22. Tyagi et al. (2013) Corporate Governance Practices in India: A Comparative Study of Selected Banks, International Research Journal of Social Science and Management, 3(8), 175-183.