Corporate Governance Practices in Commercial Banking Sector; A case of State Bank of India

Corporate Governance (CG) is the key of corporate excellence. It extends beyond good corporate performance and financial propriety. After experiencing a crucial phase of corporate crises during 1970-1990, including financial scam in developed countries (U.S.A. and U.K., etc.) and as a wake-up response to major scandals and corporate failures, need to tighten surveillance over corporate framework and behaviour was realised. CG has also been under constant scrutiny as an issue that has gained widespread importance in Indian scenario. Its significance was realised after experiencing the Harshad Mehta stock scam in 1992, which led to various initiatives in the form of guidelines, in order to strengthen CG by ensuring transparency and responsible board structure. 'Desirable Code on Corporate Governance' initiated by CII in 1998 was one of the first initiative in this direction. Subsequently, scam in Satyam Software Services Ltd. during 2009 made a dent on prevailing statutory provisions of Companies Act, 1956 and led to fill gaps by strengthening existing Companies Act 1956. The Companies Act, 2013 and SEBI (Listing obligation disclosure requirements) Regulation, 2015, has been introduced to ensure effective governance and respond promptly to the corporate misgovernance and scandals in Indian corporate sector. Corporate governance is an important aspect of managing the corporate form of the organizations. Of late it has assumed greater significance and researchers, practitioners and policy makers have been exploring ways in which modern corporation should be managed to meet the economic, social and legal needs of different socio-political systems. They have highlighted the issues like shareholder protection, transparency, reporting, related party transactions etc. Means through which they wish to achieve desired objectives are board structure, shareholding patterns, role of gate keepers, CEO remuneration, and external market for corporate control etc. researchers realized that the governance of bank is different as compared to other forms of corporate organizations. This paper attempts to understand this difference of corporate governance at banks and attempts made by different bodies to improve the corporate governance at banks. A special emphasis has been made to understand this issue for Indian banks. While recent high profile corporate governance failures in developed country have brought the subject to media attention. Through this research paper we have discussed about the corporate governance Practices in Commercial Banking Sector and in the last we also have discussed about the need and prerequisites for corporate governance in Indian banking system.