AN INQUIRY INTO CORPORATE GOVERNANCE PRACTICES IN INDIAN BANKING SECTORS

The term 'Corporate Governance' conveys about how a corporation is directed and controlled under a set of mission, values, and philosophy. It is a phrase implying greater transparency of management system in corporate entities. Corporate Governance in financial service sector is specially significant since banks have an overwhelmingly dominant position in developing economy financial systems, and are extremely important engines of economic growth [King and Levine 1993; Levine 1997] and banks in developing countries are, usually the main depository for the economy's savings. In India, although the issues of corporate governance have not received much attention in the first generation of financial sector reforms, this issue will become a natural choice in the second set of reforms. In this backdrop this paper, after examining the nature and extent of compliance of the leading national and international Corporate Governance Codes/ Guidelines by the listed public and private sector banks in India, responsible for composition of BSE BANKEX, an attempt has been made to examine the relationship between the corporate governance practices of such banks and their financial performance with the help of appropriate financial and statistical tools. Based on the findings, it has been concluded that in some important areas statistically significant relationship between corporate governance practices and financial performance of such banks exist