the ppt states why there is importance of corporate governance in banks & measures,code of conduct etc

1. CHETANA’S HAZARIMAL SOMANI COLLEGE OF
COMMERCE & ECONOMICS .
TOPIC: CORPORATE GOVERNANCE IN BANKS
SUBJECT: BUSINESS ETHICS
PRESENTED TO :
PROF. BHAVESH .V
1

2. TABLE OF CONTENTS
1. INTRODUCTION
2. CORPORATE GOVERNANCE IN BANKS-AN OVERVIEW
3. SIGNIFICANCE OF CORPORATE GOVERNANCE IN BANK AN OVER VIEW
4. WHY CORPORATE GOVERNANCE IN BANKS
5. CORPORATE GOVERNANCE AND THE WORLD BANK
6. CORPORATE GOVERNANCE IN INDIAN BANKS
7. CODE OF BEST PRACTISE IN RBI GUIDE LINES
8. REASONS FOR HIGH DEGREE OVER SIGHT
9. MEASURES TAKEN BY BANKS TOWARDS IMPLEMENTATION OF BEST PRACTISES
10. MEASURES TAKEN BY REGULATERS TOWARDS CORPORATE GOVERNANCE
2

3. INTRODUCTION
The Securities and Exchange Board Of India (SEBI) first introduced a corpora5te
governance code in 1999.
RBI approach towards the formal policy announcement to corporate governance
was first made by Dr. Bimal Jalan on October 2001
To strengthen the internal supervisory role of boards a consultative group was
constituted in November 2001.
An advisory group on corporate governance had earlier submitted its report in
March 2001
The advisory group made recommendations to bring the governance standards in
India with best international standards.
There were also some relevant observations by the advisory group on banking
supervision which submitted its report on January 2003
3

4. CORPORATE GOVERNANCE IN BANKS-AN OVERVIEW
1. Banks are institutions whose business is to handle other people’s
money.
2. These banks specialize in business connected with bills of
exchange, especially the acceptance of foreign bills etc.
3. Merchant banker is thus a financial intermediary who helps in
transferring capital from those who possess it to from those who
need it.
4. There has been a great deal of attention given recently to the issue
of corporate governance in the various national and international
forums
5. Role of OECD (Organization for Economic Cooperation and
Development) 4

5. SIGNIFICANCE OF CORPORATE GOVERNANCE IN BANKS
1. Banks have an overwhelming dominant position
2. As financial markets are usually underdeveloped banks.
3. Providing a generally accepted means of payment.
4. Many developing economies have recently liberalized.
5. Necessity of boards view towards corporate governance.
6. The separation of ownership and control.
5

6. WHY CORPORATE GOVERNANCE IN BANKS ??
a. Banks exist because they are willing to take on and manage risk.
b. Banks had incurred substantial losses.
c. Moreover, protecting the interest of the depositors becomes of
paramountimportance to banks.
d. Bank’s deal in peoples fund and should therefore act as trustees of
the deposit.
e. Sound corporate governance can contribute to a collaborative
working relationship between bank management and bank
supervisors.
6

7. CORPORATE GOVERNANCE AND THE WORLD BANK
 Based on the principles such as transparency, accountability,
fairness and responsibility.
 The stronger the partnership between the public and private
sectors , the more soundly based will be their governance
structure.
 Corporate governance is considered with holding the balance
between economic and social goals and between individual and
community goals .
 The World Bank marks an important milestone in the
development of corporate governance.
7

8. Corporate Governance in Indian Banks
Corporate governance in Indian banks is for several reasons
1. First, banks have an overwhelming dominant position.
2. Second, as the country’s financial markets are underdeveloped.
3. Third, banks are also the channels through which the country’s
savings are collected and used for investments.
4. Four, India has recently liberalized its banking system.
8

9. CODE OF BEST PRACTICES IN BANK RBI GUIDELINES
1. MITRA COMMITTEE
2. GHOSH PANEL
3. NARSIMHAM PANEL
4. BEST PRACTICE CODE(BPC)
a. The Code should cover all the functional areas like cash, safe
custody of other valuable,
b. The BPC may also incorporate practises that would help
prevention of losses to its customers and include suitable guidance to such
customers 9

10. REASONS FOR HIGH DEGREE OF OVERSIGHT
1. Depositors protection.
2. bank assets are unusually opaque.
3. It is believed that there could be a contagion effect.
10

11. MEASURES TAKEN BY BANKS TOWARD IMPLEMENTATION OF
BEST PRACTICES
A. PRUDENTIAL NORMS.
B. CAPITAL ADEQUACY.
C. ALM & RISK MANAGEMENT PRACTICES.
11

12. MEASURES TAKEN BY REGULATORS TOWARDS CORPORATE
GOVERNANCE
A. TRANSPARENCY AND ACCOUNTING STANDARDS.
B. THE OFF- SITE SURVEILLANCE MECHANISM.
C. PROMPT CORRECTIVE ACTION.
12

13. CONCLUSION
With elements of good corporate governance, sound investment
policy , appropriate Internal control system, better credit risk
management, focus on newly emerging business areas like macro
finance, commitment to better customer service, adequate
automation and proactive policies on house-keeping issues, co-
operative banks will definitely be able to grapple with these
challenges and convert them into opportunities.
13

14. 14