The purpose of corporate governance in banking sector is to strengthen the base on which it is built viz., accountability, responsibility, trust, transparency and integrity. Corporate governance in banking sector protects not just economy of the country but also the shareholders, employees, supervisors, customer and public at large.

The importance of corporate governance in banking sector is at its lowest in recent times. The lack of transparency and integrity of the staff has shown how banking products i.e.; Letter of Undertaking / Bank Guarantees can be misused to favor the corporates for personal benefits. The nexus between these entities has exposed the vulnerability of banking structure which is based on the pillar of trust. Another news in limelight, is on lack of propriety affecting the CEO of the biggest private bank in India. Do we still need more issues to jolt the RBI image of a ‘watchdog’? Will this prompt the regulator to improve corporate governance through stricter onsite audits, regular off site surveillance, more disclosures and transparency in banking.

On the other hand, does this mean a stricter regime from the regulator can limit the extant of these crimes? Stricter rules will only suffocate the pipeline of banking and loosen the trust and integrity on which the banking system is based impacting its relations with the general public…the depositors.

Final Word:

However, imposing too much pressure on the banks in the name of corporate governance will not augur well for banks and their efficiency and can lead to a financial slowdown. Though, a stronger controls through additional surveillance is recommended.

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