The IUP Journal of Bank Management
An Empirical Analysis of Key Governance Indicators of Scheduled Urban Cooperative Banks in India

Article Details
Pub. Date : Aug, 2020
Product Name : The IUP Journal of Bank Management
Product Type : Article
Product Code : IJIT20820
Author Name :Ashish Srivastava and Nitu Saxena
Availability : YES
Subject/Domain : Finance
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No. of Pages : 27

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Abstract

A challenge to the analysis of corporate governance lies in a large number of variables that define and shape it, and hence, identification of the key parameters improves the effectiveness of overall governance. This paper aims at the identification of key governance parameters of scheduled Urban Cooperative Banks (UCBs) in India through an empirical analysis. The quest for key governance parameters in this paper culminates in eight parameters, encompassing three core features, namely, members' participation, technically qualified and trained directors, and a system of accountability. Identification of these core governance features is the main finding of this paper. These core features, through their subtle influence, take care of the remaining aspects of the governance structure of scheduled UCBs and are useful not only for timely red-flagging in the supervisory processes but also for strengthening the governance of cooperative banks in India.


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The quality and effectiveness of governance is a sine qua non for the successful operation of any organization, and banks are no exception. An inherently risky nature of banking necessitates an uncompromising focus on their governance standards. Precisely for this reason, banks are tightly regulated and supervised. However, banking regulations cannot be a substitute for good governance and, notwithstanding the regulations, the quality of governance in banking institutions plays a significant role in their stability and financial soundness. While the importance of governance in banks is well recognized, the question as to what constitutes governance and how to best identify the parameters which can be used as a proxy for measuring the quality of governance has no perfect answer. As a qualitative phenomenon, the effectiveness of governance can be assessed across several dimensions and factors, but including a large number of variables for such assessment has its problems. Further, while governance remains a cornerstone for all banks, any vulnerabilities in the governance structure could be far more damaging for smaller banks than the large banks, mainly because of their lower risk appetite and also on account of certain cognitive factors as indicated by Boyd and Runkle (1993), who argued that banking


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Disclaimer: The views expressed are the authors own and do not necessarily represent the official views of the organizations they work for. The usual disclaimers shall apply.

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