in the case of non-banking and non-finance organisations. In the case of manufacturingcorporations, the issue has been maximising the shareholders’ value but in case of banking, the risk involved for depositors and the possibility of contagion assumes greater importance. Further, the involvement of government is discernibly higher in banks due toimportance of stability of financial system and the larger interests of the public. Since themarket control is not sufficient to ensure proper governance in banks, the governmentdoes see reason in regulating and controlling the nature of activities, the structure of bonds, the ownership pattern, capital adequacy norms, liquidity ratios,
Public policyframework involves multiplicity of agencies in all countries. India has Department of Company affairs, SEBI to regulate and harmonise their policies in a dynamic setting. InIndian banking sector the ownership of government is dominant. Hence government isaccountable to political institutions in terms of broader socio-economic objectives.
1.2 RESEARCH DESIGN AND METHODOLOGY
This paper is an effort to discuss various factors associated with corporate governance in banks. This paper will also analyse, present and discuses various dimensions of corporategovernance in banks especially in the context of developing economies. The presentstudy utilises secondary data which was collected from websites of LIC, UTI, SEBI,RBI, ASSOCHAM, CII, SBI, PNB, Value Research. The reference period of this studyranges from 1980-2008. The growth of concept of corporate governance is described briefly in this paper in the context of developing economies. To render the analysis more precise, useful and focused the secondary data is gathered and analysed carefully by theresearcher.
1.3 BOARD OF DIRECTORS AND THEIR COMMITTEES IN BANKS:Corporate governance and its mechanism:
a relationship among stakeholders that is used to determine and control thestrategic direction and performance of organizations
concerned with identifying ways to ensure that strategic decisions aremade effectively
used in corporations to establish order between the firm’s owners and itstop-level managers
Mechanism of corporate governance1.Internal Governance Mechanisms:Board of DirectorsManagerial Incentive CompensationOwnership Concentration2.External Governance Mechanisms:1.4 RBI’S
: At the initiative of the RBI, a consultative group, aimed atstrengthening corporate governance in banks, headed by Dr. Ashok Ganguli was set upto review the supervisory role of Board of banks. The recommendations include the roleand responsibility of independent non-executive directors, qualification and other eligibility criteria for appointment of non-executive directors, training the directors andkeeping them current with the latest developments. Private sector banks,
it isunanimously accepted that the most crucial aspect of corporate governance is that the