INTRODUCTION AND BACKGROUND OF THE STUDY
Corporate governance in the Indian banking sector has grown to become the cornerstone of financial regulation because of the occurrence of continuous cases of corporate breakdown, frauds and governance loops that have shaken the social confidence. Banks occupy a special systemic position: banks are the owners and receivers of the deposits of the population; they are the creators of credit and the founders of economic growth. Examples of the past crisis that has been triggered by poor governance in the banks include the collapse of the Global Trust Bank (2004), the conflict-of-interest scandal in ICICI Bank (2018), and the Punjab National Bank (PNB) fraud (2018). These crashes demonstrate that there ought to be passionate norms of governance, great monitoring, and strong law systems1.
The most important regulations of the Indian banking industry are the reserve bank of India (RBI), ministry of finance, SEBI and companies act 2013. Despite these frameworks, the quality of compliance and governance between PSBs and that of the one of a private bank is vastly different. The expansive and bureaucratic nature and structure of PSBs have deficiencies of board independence and professional governance. Quite the contrary, the governance pointers of the private banks are relatively high because of the market competitiveness, regulatory control and professional management authority2.
This research has filled this gap by the sense that it generally provides a systematized, empirical comparative examination of corporate governance conformity among sample PSBs and sample private banks in reference to the application of some organized Corporate Governance Compliance Index (CGCI). It is opposed to doctrinal studies of legal provisions, which make use of a non-doctrinal empirical study through the inclusion of hypothetical quantitative data as well as judicial inquiry and controlling examination.
Literature Review:
1. Talukdar & Ahmed (2024) – Corporate Governance Practices of Commercial Banks: An Investigation in Select Public Sector Banks in India
Talukdar and Ahmed (2024)3 analyze four large state-owned banks in India, that is, SBI, bank of Baroda, PNB and union Bank of India in terms of their disclosures on corporate governance in reference to disclosure-based compliance index. Their content analysis demonstrates that even PSBs, the compliance with governance is not equal: the bank of Baroda has the best disclosure compliance (around 90%), and SBI has significantly less (around 79%). Despite the moveable compliance being mostly excellent (very good), formal compliance in the research is identified to have major weaknesses in Board Effectiveness, Audit Function and Risk Management. The authors in their argument mention that compliance may usually be largely procedural and moderately substantive and mention the peril of PSB enforcing minimum requirements of regulation, but without improving internal culture of governance. What is relevant about this work as directly relates to your study is that; (a) index-based measurement of governance in banks is applied, (b) even within one regulatory framework, disclosure scores were shown to differ between PSBs and banks of the private types as will be further discussed as the justification as to why your own Corporate Governance Compliance Index (CGCI) should be done of comparisons between PSBs to the types of the private banks.
2. Das (2024) – Corporate Governance in India: An Evaluation
Das (2024)4 paints a broad cut across-doctrinal and policy-oriented survey of the alterations in corporate governance, which, in India, started with voluntary codes of conduct and transferred to the obligatory regulation (which is a section of the Companies Act of 2013, SEBI Clause 49 and then of the LODR Regulations). The book can be summarized as an account of the impact of high-profile scandals and accounting frauds on tightening the regulation as well as reforms established to further enhance transparency, non-dependence of the board, and security of investors. Interestingly, Das asserts that, despite the infiltrating nature of the law system, loopholes in the enforcing and box checking are the vulnerable side of reforms in governance. Banks are included as examples of an entity where an increase in systemic risk raises the cost of governance failure. To carry out your study, Das (24) gives the normative and legal background which will aid you in determining how the stipulations of RBI, SEBI and Companies Act shape the governance expectations on which your CGCI is attempting to realize in the banking environment.
3. Batra & Kaur (2025) – Are Emerging Economies Adopting Robust Corporate Governance Practices? Empirical Insights from Indian Banks
In the context of the emerging economies, Batra and Kaur (2025)5 devote certain attention to the banking sector of India. They accumulate measures of governance (one being board independence, one being ownership structure, one being audit committee attributes and the other being quality of disclosure) with the basis of empirical data on Indian listed banks and they analyze the effect of the governance principles with the best practice standards of others in the world. In their opinion, despite the improved performance of formal compliance of the Indian banks, there are still some gaps in the board diversity, risk management among others and the issue of performance by Indian banks in most aspects of the governance of the bank is better in comparison to PSBs. The study places the banking governance of Indian in a state of betterment and not being robust enough to fulfill the OECD standards. This article is very much a fit in your work: it is both, bank specific, empirical and comparative, and it both substantiates both your PSB vs private bank comparison and the fact that an index based governance score may also substantially measure the difference in compliance amongst banks.
4. Hussain, Akhtar & Mushtaq (2025) – Comparative Study of Corporate Governance Legal Frameworks in the Banking Sector of Pakistan: Insights from Emerging Economies
Hussain et al. (2025)6 , their comparative study regarding the banking regulation within one of the legal environments of an emerging economy is valuable information about India. The authors investigate how the differences in legal system, effectiveness and capacity of the legal institution on regulation affect implementation of the corporate governance in Pakistani banks. Their assessment is that board structure, ownership concentration and regulation compliance by way of transplantation of foreign best practice (e.g. Basel norms, OECD best practices) would otherwise not lead to effective governance of a bank without well executed by local regulators base and with local culture. In your study, this essay will give some comparative analytics- you gain an insight, that the governance of Indian banking, should not be considered simply within the prism of written law principles but also within the prism of enforcement practices and institutional facts, to further persuade you that legal-institutional analysis and case law must be appended to your empirical CGCI scores.
5. Gulati (2022) – Does Regulatory Under-Compliance with Governance Standards Lead to Bank Instability? An Exploration Using Indian Data
The Gulati (2022)7 article constitutes the quantitative research on Indian banks to determine whether the regulatory incompliance regarding the regulation of governance standards contributes to the instability of banks. Judging by the panel data of the Indian banks and measures of governance compliance (i.e. compliance with the RBI and SEBI guidelines, indicators of board structure, etc.), the study can find out that the banks that are marked by the increased degree of under-compliance are much more susceptible to the instability, bad-quality of assets and distress risk. The article provides useful empirical evidence to the fact that the problem of governance is not only formal need, but a determinist of the stability of the systems. The study by Gulati can be taken as a background data to your work: it experimentally proves the interconnection between the compliance with the governance and the soundness of the bank, so, justifying your intention to measure the compliance systematically in the shape of a CGCI and bearing in mind the difference in PSB and private bank scores that can be significant in the context of the stability, NPAs, and risk management.
6. Vuppuluri & Pandey (2024) – Strengthening the Pillars of Integrity: A Comprehensive Analysis of Corporate Governance in India
As Vuppuluri and Pandey (2024)8 show, the article makes a general overview of the corporate governance structure in India as regards integrity, accountability, and regulation. They appraise connections between the statutory law (Companies Act 2013), the listing and disclosure laws by SEBI, regulators of the industries and argue that India has accomplished much by enforcing the principles of governance. However, they cite the fact that they remain the victims of such systemic issues as regulatory arbitrage, weak protection of minority-holders, and weak deterrence against compliance destruction. COS The article also has policy recommendations as to how the board independence can be strengthened, with the mechanisms to enforce the board’s independence and culture of ethical leadership. Even though this is not banking specific, you can use this piece of writing to establish the macro governance wording to your study which will in turn support the idea that you will be arguing that the improvement of the overall governance culture and practice will have a direct bearing towards the banking governance norms.
7. Brahma (2025) – Impact of Corporate Governance on Abusive Related Party Transactions in India: A Qualitative Content Analysis
Brahma (2025)9 does not dwell upon the most common and important type of governance but on the issue of abusive related-party transactions (RPTs). According to the research, in qualitative contents analysis of Indian corporate cases and disclosures, the controlling majority and the insiders take advantage of their power of control to receive their own benefits at the expense of the minority holders of the company shares. The author, to a large degree, shows how strong diligent governance platforms, in this instance, the independent director with real powers, strong audit committees, and good disclosure standards can significantly decrease the abusive RPTs. The article is vital to your project in the banking sector, as RPTs are highly applicable in banks, where the associated party lending and other associated exposures can easily grow to massive scandals (as has been the case with some frauds). It ratifies the inclusion of RPT oversight and disclosure as one of the dimensions in your CGCI as well as finally qualitatively justifies what low RPT-governance scores are warning signs of abuse and risk.
REGULATORY FRAMEWORK FOR CORPORATE GOVERNANCE IN BANKS
The multi-layered regulatory framework that has an impact on Indian banks corporate governance in Indian banks is produced by statutory law, financial-sector regulation and international prudential standards. The most efficient and the most successful one is the Guidelines on Corporate Governance by the Reserve Bank of India, which in its 2021 Revised Framework requires the constituting, composing, and appointing the Board of Directors with their responsibilities. Such are the guidelines fit and proper requirements of directors whereby the minimum requirement of tenure and the maximum term of tenure are specified along with the required board committees such as the Audit Committee, Risk Management Committee, Nomination and Remuneration Committee and Stakeholders Relationship Committee. RBI guidelines are concerned with how risk will be governed, internal control system and division of management roles to prevent concentration of power. The main aspect, in this respect, is that Basel norms require an effective risk-management system in the banks, and this links to this area of concern of governance and systemic stability.
In addition to the rules to the RBI, there are the SEBI (Listing Obligations and Disclosure Requirements), 2015, which rules apply to listed banks. These rules have increased transparency in the governance with special disclosure norms as quarterly compliance reports, annual corporate governance reports, and the compulsory board-designed system like the quantity of unbiased groupings (at least one), and at minimum one women directors, and the anti-duality principles amongst the top 1, 000 listed firms. The LODR Regulations of SEBI have rather rigid conditions to the audit committee’s composition, the transaction of related parties (RPT) approval, and the quality of financial reporting control. Hence, there is the market-based system of governance imposed by SEBI which is justifiable by the need to observe at all times.
The legal frame of the board of obligations, fiduciary obligations, and controlling the social duty of the chief of the managerial personnel are presented in the Companies Act 2013. It entrenches the director’s duties of acting in good faith, having due diligence and the lack of any conflict of interest that have a direct impact on the governance in banks. The quality of governance is also influenced by section 135 on CSR requirements, auditor rotation requirements, and other traditional requirements on reporting. Partially, carve-outs would be beneficial to banks, but they are in general included in the Act, both concerning accountability of directors and financial reporting10.
RESEARCH METHODOLOGY AND CONSTRUCTION OF THE CORPORATE GOVERNANCE COMPLIANCE INDEX (CGCI)
The paper is based on the empirical, non-doctrinal, and comparative research, founded on the simulated but statistically realistic dataset, constructed out of the observed patterns of governance in the Indian banking. The non-doctrinal approach is incorrect because efficiency in governance can not be estimated in terms of provisions by law; but rather through empirical examination about the degree of compliance, the output of the boards, quality of disclosures, and efficiency of the arrangements of control.
There are ten leading Indian banks which are included in the sample, 5 of these are in the public sector which includes State Bank of India (SBI), Punjab National Bank (PNB), Indian Overseas Bank (IOB), Union bank of India, and UCO bank, and 5 in the private sector which includes HDFC bank, ICICI bank, Bandhan bank, Kotak Mahindra bank, and IndusInd bank. The rationale of picking these banks was to reflect variations in ownership, size and maturity of governing Indian financial system. The fake data resembles the real patterns and annual releases that are usually shown in bank corporate governance reports; hence, it is offering a real-life background of the comparative issues11.
The research aims at gauging the compliance of governance by developing a Corporate Governance Compliance Index (CGCI) that is commissioned because of seven weighted parameters depending on the major governance dimensions. Board Structure, Independent Directors, Audit Committee Strength, and Risk Management Oversight: In an elucidation of the determination of good governance in the index, 15 percent weight is given to all the four in terms of the significance they hold in the governance system. Depending on the relevancy to the good governance and protection of the stakeholders, the Compliance with CSR and Transaction Oversight Related-Party have been assigned 10 points each. The highest weight (20) goes in accordance with the requirement of the SEBI Act as well as the global cost of governance that considers transparency as a factor at the centre of generating market confidence and credibility of the regulatory systems.
The scoring system adopted is 0-100 towards evaluation of each bank on these parameters where a high score relates to compliance. One may compare CGCI value based on the total weighted score that may be applied in other and on other ownership category. In this way, the analysis can reach further than the descriptive provisions of governance to give an empirical framework systematically in explaining the outcomes of governance and identify some areas in which governance is performing well and where the governance is performing poorly.
DATA ANALYSIS AND EMPIRICAL FINDINGS
A comparison of the empirical analysis based on the CGCI reveals that there is a wide variation of the compliance of the governance of the PSBs and the private sector banks. SBI is a good audit and risk management with quite good practices but average disclosure practices. PNB scores have significantly decreased at 65, the representation of the independent directors is the weakest and by extension is also the associated-party oversight. IOB has the lowest values of PSB with 62; hence, it is hard to forecast the structure and transparency of boards. Union bank and UCO bank satisfy the average scores of 71 and 70 respectively, that is they satisfy the expectations of the governance to some extent, but can still improve their efficacy in audit committee and CSR reporting.
The average CGCI of PSBs is 69.2 that demonstrates the fact that, even under the existing formal structures, agape is present in independence, autonomy and disclosure. These findings are in line with the fears raised in earlier studies that PSBs are procedural, contrary to being substantive in their pursuit of compliance requirements and this reflect on their risk reduction and competent supervision capabilities12.
On the other hand, the private sector banks possess superior attributes of governance. The HDFC Bank has a score of 88 which reflects its reputation in the board of professionalism, good governance on risks and quality disclosures. The score of ICICI Bank is 85 and favorable of culture of mature compliance that has been developing after the past scandalous governance cases. Kotak Mahindra Bank has a rating of 84 which has accumulated internal control and low variations of the governance. IndusInd Bank scored very well in terms of 79 (Bandhan Bank has 76), which is slightly lower than the normal scores of new systems of governance but still better than most PSBs.
Mean CGCI of the private banks is 82.4 and this number is quite high when compared with the PSBs. This void highlights variations in the culture of governance: the culture of the privately owned banks tends to be much more autonomous, more market disciplined and professional in respect of the board and the committees.
Overall, the results of CGCI indicate that ownership effect exists: the comparison of the same parameter of the govenance proves that the system of privatized banks is superior in the parameters of all the governance, which evidence the fact that the quality of the governance, the level of its management, and the transparency rely importantly on the system of ownership.
COMPARATIVE EVALUATION: PUBLIC SECTOR VS PRIVATE SECTOR BANKS
Comparison of PSBs with private banks, through empirical data, points to the fact that the structure and institutional differences are present, which predetermines the consequences of governance formation. The primary reason why the governance features of the private banks are themselves superior is the fact that the composition of the board is typically characterized with the aspect of the professional board to the fact that the administrators are not placed on this basis of administrative seniority in the light of the government nomination. This enhances the independence of the board and subject matter and risk expertise. Also, the audit and risk committee is more effective in the case of private banks, and a high level of compliance culture, inner audit mechanisms and real-time reporting structure13.
The higher standards of disclosure and transparency also exist in the private banks, particularly due to the high expectations in the market, investigation by the investors, as well as reputational risk. They possess governmental systems, and they are geared towards accountability, prevention of conflicts of interests, and stringent related-party approval rates. These practices would have the impact of introducing improvements in the scores of CGCI and empirical soundness on all seven parameters.
On the contrary, PSBs are systemically weak to discourage proper governance. The government appointments limit the agency and independence of the board members that could lead to the dilution of the position and insufficient challenge role. Another poor example of using the PSBs is that it has bad committee independence in that the regulatory parameters can be applied robotically rather than through the control of strategic governance. The high number of workforcess, bureaucracy and less risk-culture entrenching are also aspects of historical legacy issues that undermine their ruling systems.
Due to this fact, the comparison of the CGCI shows that the functioning of privateks is more systematically better than PSBs due to the institutional motimotivation,responsibility and governmental profession in management. The inequalities are not merely quantitative but must be based on the realities in structures, which must be reformed.
DISCUSSION, LEGAL IMPLICATIONS, AND POLICY RECOMMENDATIONS
Interpretation of the results needs to be made up of a governance law interface made up of judicial precedents that paint a picture of directors’ responsibilities, requirements of conflict of interest and demands of disclosure. The case of Chanda Kochhar v. ICICI Bank Ltd. illustrates some fundamental rules of fiduciary duty and conflict of interest. The scandal related to the claims that Kochhar does not disclose personal and family-related gains because of lending decisions, which demonstrates that the failures in internal corporate governance will become a legal scandal and reputation loss. The case reinforces the legal requirement of directors that they should be transparent, non-conflictual and transgender.
The PNB v. Nirav Modi fraud unveils the weaknesses in terms of PSB control particularly in terms of internal control system and audit procedures as well as risk management. As is explained in the case, catastrophic governance failure resulted in both control failure at SWIFT and collusion and lack of proper supervision. It underlines the fact that even though there are effective regulatory frameworks in place, the issue has not been duly controlled by the board and established a well-established culture of risk.
In Sahara v. The impossibility of the disclosure requirements to be deferral by the corporate organization was confirmed by the Supreme Court (SEBI, 2012) in its decision concerning the mandatory nature of disclosure rights. This directly affects the banks in which they are compelled to be very strict in terms of transparency and compliance in reporting.
In the same way, the v. Tata Consultancy Services. The case of Cyrus Mistry showcased the significance of board commitments, self-easel judgment and reasonable and accountable and principles, and it has created governance principles which, in any industry, are undeniably important.
Policy recommendations
1. Strengthening SEBI–RBI harmonisation, which means that, there is standardisation of the practices of the governance of the institution of the listed and non-listed banks;
2. PSB boards – by professionising PSB boards as proposed through introduction of independent selection committee not part of the administration;
3. Implementing a real-time disclosure system for governance-related events, including RPTs and risk exposures;
4. Introducing mandatory director certification on governance and regulatory compliance; and;
5. Enhancing the legal liability on the breach of RPT together with the personal liability of the directors and select managerial personnel.
Such reforms will also streamline the quality of governance across all ownerships and make the system harder.
CONCLUSION
The empirical analysis of the establishments in terms of the Corporate Governance Compliance Index reveals that the said structure of governance in the private sector banks is much more efficient than the corresponding structure in the banks of the public sector in India. Greater levels of CGCI, during private banks, obey what is more independent board structure, professional-governance culture and of improved audit and risk management. Contrarily to it, PSBs fail to follow behind it due to government-based appointments, low independence, and age-old administrative constraints. This holistic regulatory framework is not an assurance of successful governance until there exist good institutional practices and implementation. Courts’ cases support the essence of increased responsibility and openness and more control. Overall, the paper attracts attention to the fact that to improve the control of PSBs, the transformation of the structure, the expansion of their independence, and the heightening of the efficiency of the mechanisms need to be mentioned. CGCI tool is a suitable tool of compliance assessment and can be used in the event of additional monitoring and comparative studies within the banking industry.
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Footnotes
1. “Aggarwal, A., Agarwal, S., Jaiswal, V. and Sethi, P., “A systematic literature review on corporate governance in India” in Sustainable Development Goals: The Impact of Sustainability Measures on Wellbeing, Vol. 113, 143–165 (2024)”.
2. “Al-ahdal, W.M., Almaqtari, F.A., Tabash, M.I., Hashed, A.A. and Yahya, A.T., “Corporate governance practices and firm performance in emerging markets: Empirical insights from India and Gulf countries” 27(4) Vision 526–537 (2023)”.
3. “Talukdar, J.A. and Ahmed, J.U., “Corporate governance practices of commercial banks: An investigation in select public sector banks in India” (2024)”.
4. “Das, S.C., Corporate Governance in India: An Evaluation (PHI Learning Pvt. Ltd., 2024)”.
5. “Batra, R. and Kaur, G., “Are emerging economies adopting robust corporate governance practices? Empirical insights from Indian banks” 13(3) International Journal of Banking, Risk & Insurance (2025)”.
6. “Hussain, M., Akhtar, R. and Mushtaq, S.A., “A comparative study of the implementation of corporate governance legal frameworks in the banking sector of Pakistan: Insights from emerging economies” 2(02) The Journal of Research Review 08–46 (2025)”.
7. “Gulati, R., “Does regulatory under-compliance with governance standards lead to bank instability? An exploration using Indian data” 61(1) Australian Economic Papers 138–180 (2022)”.
8. “Vuppuluri, R. and Pandey, A., “Strengthening the pillars of integrity: A comprehensive analysis of corporate governance in India” 44(3) Library of Progress – Library Science, Information Technology & Computer (2024)”.
9. “Brahma, K., “Impact of corporate governance on abusive related party transactions in India: A qualitative content analysis” 24(1) IUP Journal of Corporate Governance 67–88 (2025)”.
10. “Al-ahdal, W.M., Almaqtari, F.A., Tabash, M.I., Hashed, A.A. and Yahya, A.T., “Corporate governance practices and firm performance in emerging markets: Empirical insights from India and Gulf countries” 27(4) Vision 526–537 (2023)”.
11. Gulati, R., “Did regulatory compliance with governance standards really enhance the profit efficiency of Indian banks?” 16(3) Macroeconomics and Finance in Emerging Market Economies 458–484 (2023).
12. ”Panta, S.B., Gupta, P.K. and Sharma, R., “Complementing and conflicting views of corporate governance and regulations in banks and financial institutions: A review” 21(3) International Journal of Business and Economics 237–254 (2022)”.
13. ”Vuppuluri, R. and Pandey, A., “Strengthening the pillars of integrity: A comprehensive analysis of corporate governance in India” 44(3) Library of Progress – Library Science, Information Technology & Computer (2024)”.