Constructing a Framework for Evaluating Corporate Governance Practices in the Indian Banking Sector

Purpose: Banks play a crucial role in economic growth and hold a predominant position within the financial system of any nation. Corporate governance became significant in the banking sector following the 2008 global financial crisis. This research aims to develop a corporate governance index and examine the degree to which banks in India implement it. Furthermore, the banking institutions have been ranked according to their corporate governance disclosure standards. Methods: The suggested index emphasizes banks' corporate governance practices, addressing challenges in the Indian banking sector. The unweighted binary approach is employed to construct the corporate governance index. For this study, a sample of 29 banks is selected, comprising 12 public sector banks and 17 private sector banks. The content analysis technique was employed to gather data from banks' annual reports for the period 2010-11 to 2022-23. A subsequent Mann-Whitney U test is employed to assess disparities in corporate governance practices between public and private sector banks in India. Findings: The study revealed an improving trend in corporate governance practices among public and private sector banks. However, Indian banks remain concentrated on corporate governance practices mandated by Securities and Exchange Board of India and Reserve Bank of India. Moreover, there exists a substantial disparity in the corporate governance practices of public and private sector banks. The corporate governance practices of private sector banks are relatively superior. However, Indian banks must enhance their corporate governance standards and ensure full transparency in their reports. Practical implications: The execution of the proposed index illustrates the current state of corporate governance practices within the Indian banking sector. This report is beneficial for banks and all stakeholders in comprehending corporate governance disclosure practices and the deficiencies within the banking sector.