corporate governance practices: a comparitive study of sbi & hdfc

International Journal of Research in IT, Management and Engineering

ISSN 2249-1619, Impact Factor: 5.309, Volume 5, Issue 5, May 2015

Website: www.indusedu.org

E-mail id:- [email protected] Page 7

CORPORATE GOVERNANCE PRACTICES: A COMPARITIVE STUDY

OF SBI & HDFC BANK

Dr. Meenu Maheshwari

Assistant Professor, Department of Commerce and Management, University of Kota, Kota(Raj.)

Sapna Meena

Research scholar, Department of Commerce and Management, University of Kota, Kota(Raj.)

ABSTRACT

Corporate governance has become the latest buzz ward in the corporate sector in the world.

Corporate governance refers to the way a corporation is governed. India’s SEBI committee on

Corporate governance” defines corporate governance as the “acceptance by management of the

inalienable rights of shareholders as the true owners of the corporation and of their own role as

trustee on behalf of the shareholder .There are many different models of corporate governance

around the world. Corporate governance is concerned with ways of bringing the interest of

investors and manager. Poor corporate governance of banks has increasingly been

acknowledged as an important cause of the recent financial crisis. Given the developments since

the Asian financial crisis in 1997. Listed banks and non-listed firms have adopted firm-specific

corporate governance codices. In particular, the Basel Committee on Banking Supervision has

already published two editions of a guideline entitled “Enhancing corporate governance for

banking organisations” which perfectly reflects the supervisors’ perception of and approach to

the issue Still, only during the second year of the financial crisis, the issue of banks’ good

corporate governance has again started to attract pronounced interest. For this purpose, this

article examines the role of corporate governance in SBI & HDFC, which are the part of the

public sector and private sector respectively. The study has conducted a case study on SBI &

HDFC banks to review their corporate governance practices in India .The study tries to see

better corporate governance leads to better performance in both banks(SBI&HDFC).For this

secondary data in the form of annual report has been collected from the banks website. On the

basis of detailed analysis of corporate governance practices of the two banks. It is found that

,HDFC Bank believes in adopting and adhering to the best recognized corporate governance





practices and continuously benchmarking itself against each such practice. The Bank

understands and respects its fiduciary role and responsibility towards its shareholders and

strives hard to meet their expectations. The Bank believes that best board practices, transparent

disclosures and shareholder empowerment are necessary for creating shareholder value. The

philosophy on corporate governance is an important tool for shareholder protection and

maximization of their long term values. Also, In State Bank of India is committed to the best

practices in the area of Corporate Governance, in letter and in spirit. The Bank believes that

good Corporate Governance is much more than complying with legal and regulatory

requirements. The article reached on a conclusion that corporate governance practices are more

satisfactory in SBI as compared to HDFC bank.

Keywords-: Corporate governance, banks, Board of director, Code of conduct, Banking

regulation.

INTRODUCTION

In the liberalized economic environment and integrations of the country into world market the

corporate sector in world at present cannot ignores the importance of Corporate Governance.

There were several frauds and scams in the corporate history of the world. One after the other

collapses of leading companies like Robert Maxwell, Enron, Satyam and other scams pulls the

attraction of investors towards Corporate Governance. Most of the scams are related with poor

Corporate Governance and due negligence of responsibilities by board. In the middle of 2007

world economy faces the worst financial crisis according to leading economists, since the Great

Depression of 1930. Failure of key business decline in economic activity, bank solvency, decline

in consumer wealth losses on the global stock markets, mergers acquisition and bailouts are

some of the effects of this credit crunch globally. Specifically, the banking sector had to confront

major issues caused by the over extension to credit.

After all this Global attention has been given to Corporate Governance. Corporate Governance is

now an issue and important factor that can be used as tool to maximize wealth of shareholders of

a corporate. Corporate Governance aims are the vision, values and visibility. World wide it has

now become necessary for big corporate houses to address the issue of Corporate Governance as

investor demands fluctuate. Responsibility, transparency, fairness and accountability are the





four vital pillars for strong Corporate Governance. Large and trusted companies across the globe

realized the significance of Corporate Governance and subsequently took drastic steps to ensure

practice of Corporate Governance. (Pushkar Gupta 2010). Corporate Governance is aimed at

ensuring proper governance of business as well as complying with all the governance norms

prescribed by regulatory board for the benefit of all interested parties. The basic objective is the

maximization of long term shareholders value with in the parameter of public law and social

ethics to give an impression to customers and employees about the transparency and fairness of

business.

Effective corporate governance is important for any company to be successful irrespective of the

type of business it does but for bank and financial institutions Corporate Governance assumes a

greater level of importance. There may be a couple of reasons for this: firstly bank form a very

vital connection in the financial system which helps to mobilize and all at funds between

borrowers and depositors. Efficient banks help create healthy economics as they are the back

bone of any financial system. Secondly banks are morally responsible for the funds which they

mover within an economy as they care the keepers of the money of their depositor. This forces

the government to help them out when they are in trouble.

In contrast to companies in other sectors, Corporate Governance in the Indian Banking sector has

very different implications. The Indian banking is subject to stricter guidelines and parameters.

The Indian banking system has a huge canvas of history which covers the traditional banking

practices from the time of Britishers to the reforms period, nationalization to privatization of

banks and now increasing members of foreign banks in India. Therefore banking in India has

been through a long journey. Banking industry in India has also achieved a new height with the

changing time. The majority of the banks are still successful in keeping with the confidence of

the shareholders as well as other stakeholder.

In Indian banking sector, the Basel committee 1999 is most effective development. Which report

was bank have to display the exemplary of Corporate Governance practices in their financial

performance, transparency in the Balance Sheet and compliance with other norms laid down by

section 42 of Corporate Governance rules. Most importantly, their annual report should disclose

accounting ratio, return on assets, NPAS, maturity profile of loans, advances investment,





borrowing & deposits. The latest guidelines given by RBI and ensure that the financial statement

are made in a fraud free manner and should mirror. The implement of Corporate Governance. It

is very much essential for banks to devote adequate attention on internal control system so as to

maximize their returns on each unit of capital inducted trough an effective funds management

strategy and mechanism .

2. REVIEW OF LITRATURE

2.1 Articles, Working Papers & Research Papers at International Level

In the past few year Corporate Governance has been the topic of interest for many researcher &

scholars. This may be because of financial crisis and scams all over the world. Much research

has bee carried out by many authors/scholars & researcher world wide.

“Corporate Governance : Some Theory and Implication (2003)”, This article attempts to

provide a theoretical framework for the corporate governance debate and to derive some

implications which may be useful as a guide to policy & writer argued that corporate governance

issues arise wherever contracts are incomplete and agency problem exist & in many cases a

market economy can achieve efficient Corporate Governance by itself. An article published in

German Law Journal on “Positive Corporate Governance and its implication for executive

compensation (2005)”, Author’s view, If we embrace positive corporate governance in which

the positive strength and virtues of company executive are emphasized, We can move towards an

environment in which heavy regulation is replaced by positive corporate norms inside the

corporation. The article highlighted that the link between pay and performance is at best

questionable.One working paper was developed on “Corporate Governance, Risk

management and Bank performance: does type of ownership matter? (2007)”, This research

provides a conceptual model called triangle gap model (TGM) The purpose of the paper is to

investigates the relationship among corporate governance, risk management & bank performance

in Indonesian banking sector and they find that relationship between foreign-owned banks home

better implemented good corporate governance than have joint venture owned banks state owned

banks & private owned banks.A research paper got published on “Corporate Governance and

Bank performance (2010)”, Which finds that Corporate Governance did not have any impact

ROA, ROE & Investment return & their show that bank performance does not conform to





Corporate Governance and negligibly affected. The relationship between Corporate Governance

and bank performance were insignificant and obscure indicating that the more shares are held by

insiders like officers, directors.In the same year another research paper was published on

“Practice and standard of Corporate Governance in the Nigerian banking industry

(2010)”, with a case study of Nigeria banking industries and used OCED corporate Governance.

In this paper the writer find that a divergence between the code of Corporate Governance and its

compliance more importantly & to build a sustainable public confidence in the banking

industries there is need to strength the enforcement mechanism of the regulatory institutions.

Suggest by author, it is important to restore the confidence of the overage shareholder in the

capacity of the judicial system to help him enforce his right. Again in the same year one article

was published on “Corporate Governance and Bank performance in Romanian banking

system (2011)”, In order to complete the research the author used financial indicators. The study

consists in establishing an econometric correlation between the appliance of sound Corporate

Governance principles and economic performance & find that there are significant differences

between the financial results of banks. The study suggested that encourage banking activism

regarding social responsibility.Another research paper was developed on “A review of

Corporate Governance: Ownership structure of domestic owned banks in term of

government connected ownership and foreign ownership of commercial bank in Malaysia

(2012)”, this research has given a brighter insight into Corporate Governance and bank

performance. Writer find that privately owned bank and domestically owned bank in Malaysia

have a good performance because of implementing superior Corporate Governance.

2.2 Articles, Working papers & Research Paper at National Level

A working paper presented on “Public Sector Banks and the Governance challenge -

The Indian experience(2002)”, whose object of this paper is to detail the Indian experience in

meeting the governance challenge with special reference to public sector banks. This paper set

out the historical context on The Indian Experience and suggested that accompany by

transparency in the area of managerial reporting and financial accounting while legislative

changes are necessary for an enduring improvement in Corporate Governance. In the field of

accountancy we got an article on “Accounting for good Corporate Governance (2008)”, this





article is an earnest effort to uncover that issue and to protect it from such unfounded critics.

Author focuses good Corporate Governance is a must for today’s complex and dynamic business

environment. So, it should be cultivated and practiced regularly. He also suggested that we may

promote a global Corporate Governance ranking system. Corporation that genuinely recognized

and embrace the principle of good governance will derive enormous benefits, improve

competitiveness and financial performance. Taking a step ahead another article was published on

“Corporate Governance in the banking sector-2011”, which described the report by the Basel

committee and how helps in the corporate governance in bank. Also writer explained that the

best corporate governance practices for banks are concerned, they may include realisation that

the times are changing, establishing on effective, capable and realiable board of directors ,

establishing a corporate code of ethics by banks for themselves , having a effective and operating

audit committes , compensation committee and nominating corporate governance in place.

Author said that banks being a separate category of financial institution requires specialised set

of norms for corporate governance .One working paper on “Study on the state of Corporate

Governance in India-Evolution, Issues and Challanges for the future (2012)”, was developed

which complies a history of the evolution of corporate governance reforms in india and through

a survey of existing research, identifies issue that are peculiar to the indian context and which are

not being adequately addressed in the existing corporate governance framework . This paper

suggest the need for research in the field of corporate governance research that would support

policy formation in order to make the next generation of corporate governance reforms more

effective for the Indian conditions. A very deep study in the history of Corporate Governance

has been conducted in the article titled “Corporate Governance in India- A Legal Analysis

2012”, which aims at reviewing the various development in corporate governance in india and

find that the current corporate governance regime in indian straddles both voluntary and

mandatory requirements. Writers also found that India has one of the best corporate governance

legal regimes but poor implementation together with socialistic policies of the pre-reforms era

has effected corporate governance.

3. RESEARCH METHODOLOGY

3.1 INTRODUTION





The focus of the research is on evaluating Corporate Governance in SBI which is the part of

public sector banks and HDFC bank which is the part of private sector bank and specifically, to

examine the effectiveness of Corporate Governance in SBI and HDFC in achieving economic

growth, curbing malpractices, bringing transparency of banking transactions and how it can be

mandatory. So the research methodology was prepared meticulously to identify and comparing

the effectiveness of Corporate Governance between SBI and HDFC bank

3.2Objectives of the Study

The main objective of this study is to determine the Corporate Governance practices in the SBI

& HDFC. The study targets to identify the practices in different Corporate Governance issues.

The present study also critically examines the governance prevailing in the banking sector in

India more specifically the objective of the study are to :-

Determine the good Corporate Governance practices in SBI & HDFC.

Identify the control environment and processes of the Corporate Governance in SBI &

HDFC.

Determine the level of disclosure they accuracy and timeline of the financial position,

condition and the non-financial information of the SBI & HDFC.

3.3 Sample Size

Indian banking sector comprises the varieties of banks that can be divided as public sector banks

private sector banks, foreign banks and Co-operative banks etc. Though Corporate Governance

bind to all types of banks but for precise focus. I have select SBI & HDFC which one is the part

of public sector banks and the second one is the part of the private sector bank.

3.4 Sources and Collection of data

The work proceeded on the basis of secondary data. Secondary data and information were culled

from annual reports which are obtaining from different sources. The data and information used

from annual reports of the financial year 2013-14. These Annual reports are easily available on

websites of banks.

3.5 Hypotheses Development

Ho; SBI & HDFC bank is not showing maximum compliance towards corporate governance

norms.





H1: SBI & HDFC bank is showing maximum compliance/towards Corporate Governance norms.

4. ANALYSIS AND INTERPRETATION

4.1 Introduction

Through Annual report this study try to find Corporate Governance practices in SBI & HDFC.

This study is divided into eight parts each part is analysing status of Corporate Governance

disclosures.

4.2 Share holding Patten

Share holding pattern is the structure of shares held by individual promoters or in other words

brokers, public institutions etc. Shareholding pattern of 1 year the selected banks are shown in

the following table. This study will help in under standing the dominant shareholder group.

Shareholding pattern is divided into two categories-

Promoter’s Holding

Non-Promoters

Table – 4.1

Shareholding Pattern of the SBI( For the year 2013-2014)

S. No. Categories SBI HDFC

Total Number of Shares in dematerialized form

A Promoter’s Holding

1 Promoters

Indian 58.60 22.64

Foreign - -

2 Persons Acting in concert - -

3 Friends & Associates of Promoters - -

Sub-Total (A) 58.60 22-64

B Non-Promoter’s Holding

1 Institutional Investors - -

Mutual Funds - -

Mutual funds & UIT 4.84 4.63

Banks & Financial Institutions 0.32 0.08





Source : Annual Reports of SBI & HDFC

o FB - Foreign Bodies

o FN - Foreign Nationals

o OCB - Overseas Corporate Bodies

o GDR - Global Depository Receipt

o ADS - American Depository Shares

Banks, financial Institutions, Insurance

Companies (State/Central Govt.)

14.90

5.18

Banks Mutual funds & Financial Institutions - -

LIC of India - 16.54

GIC & other Nationalized GIC - -

Foreign Institutional Investors (FII) 11.18 34.08

Foreign Financial Institutions (FFI) 0.03

Sub-Total (B) 31.24 60.54

C Others

Private Corporate Bodies 2.58 8.09

Indian Public 5.00 7.97

NRIs & OCBs 0.27 0.32

FII/OCB/NRT - -

OCB/NRI/FB/FN - -

FII/NRI/FB/FC/OCB/FN - -

GDRs - -

ADS (Deutsche Bank Trust Company Americas) - -

F Foreign Banks/Companies 0.10 0.1

Indian Companies 0.06 -

Trusts 1.12 -

HUF - -

Clearing Members 0.6 -

Any Others 0.43 0.34

Sub-Total (C) 10.16 16.82

GRAND-TOTAL (A+B+C) 100 100





OBSERVATION FROM TABLE 4.1

Very high percentage of promoters in share holding of SBI but in HDFC Non promoters

held more share

Insurance Companies & foreign Institutional investors also hold sufficient share in both

Banks.

4.2 BOARD STRUCTURE STRENGTH AND SIZE –

According to the Birla Committee (1999) the board of the company has an optimum combination

of executive and non executive directors with not less than fifty percent of the board comprising

the non executive directors. The number of independent directors would depend on the nature of

the chairman of the board. In case a company has a non executive chairman at least one third of

board should comprise of independent directors and in case a company has an executive

chairman of least half of board should be independent.

Following table 4.2 will show the board structure strength and size of the SBI & HDFC bank.

This evaluation will help in observing at what extent these banks complying with prescribed

rules and regulation.

Table –4.2

Board Structure Strength and Size For the year 2013-14

S.No. Categories SBI HDFC

I. Total Number of Director 16 11

A No. of Executive Directors 4 3

Promoters - -

Others - -

B No. of Non-Executive Directors 12 8

Promoters - -

Independent 4 6

Nominee 5 -

Others 3 2

II. No. of Directors in Percentage

Executive Directors 25% 27.27%

Non-Executive Directors 75% 72.73%

Independent Directors 25% 54.55%

Source : Annual Reports of SBI &HDFC






Both banks have an optimum combination of executive and non-executive directors..

There is no information about independent director in SBI bank but information provided

by HDFC.

4.3 Directors Attendance in the Board Meeting

The Birla Committee recommends that board meeting should be held at least four times in a year

with a maximum time gap of four months between any two meetings maximum attendance at

board meetings ensures good accountability and commitment of the board members.

Following table 4.3 shows the Directors attendance in the board meeting of SBI bank.

Table –4.3

Directors’ Attendance In The Board Meetings For the year 2013-14

Source : Annual Report of SBI & HDFC

*AGM : Annual General Meeting


Both banks are fulfilling the minimum criteria of at least four board meeting in a

financial year.

No. of Board Meeting SBI HDFC

Total Meeting (12) (8)

1 Nil Nil

2 1 Nil

3 Nil 1

4 4 1

5 2 Nil

6 2 4

7 1 1

8 1 5

9 1 -

10 Nil -

11 3 -

12 Nil -

13 - -

AGM* 12 Present 10 Present





Attendance of the board in all meetings is not very satisfactory in SBI but attendance of

the board in all meetings is satisfactory in HDFC.

4.4 Audit Committee

It is required as per clause 49(II) of the listing agreement that a qualified and independent audit

committee should be set up by the board of a company which, will enhance transparent practices.

Table 4.4 is developed to check the audit committee status of the SBI.

Table –4.4 :

Status of Audit Committee of Bank (For the year 2013 -14)

S.No. Particulars SBI HDFC

1. Transparency in composition of the

committee

Total Members-8

whole time Director-2

official Director-2

NED-4

Chairman-

NED

Total Members

NED-5

Chairman-

NED

2. Compliance of minimum requirement

of number of IDs in the committee

No Information

Provided about ID in

Corporate Governance

report

No Information

Provided about ID in

Corporate Governance

report

3. Compliance of minimum Requirement

of the number of the committee

meeting

Total meeting-10

2 attended 10

2 attended 9

1 attended 8

1 attended 7

1 attended 6

2 attended 1

Total meeting-8

4 attended 8

1 attended 0

4. Information about literacy & financial

expertise of the committee

Information provided in

the corporate governance

report



report

5. Information about participation of head

of finance, statutory auditors, Chief

internal auditors, committee meetings



report



report

6. Disclosure of audit committee charter

& terms of reference

Disclosed in corporate

governance report

Laid down by the control

board is in place and

updated periodically

7. Published of Committee report Not published in corporate

governance report

Not published in corporate

governance report






TM - Total members in the Audit Committee

NED - Non-Executive Directors

ID - Independent Directors.


Both banks are fill up all requirement of audit committee.

Chairman of meeting was NED in SBI as well as HDFC.

Both bank have not published committee report.

4.5 Shareholder’s/Investor’s Grievances

It is recommended that a board committee under the chairmanship of a non-executive director

should be formed to specifically look into the redressing of shareholder complaints of this

committee is that such a committee will help focus the attention of the company on shareholders’

grievances and sensitize the management to redressal of their grievances.

Following table 4.5 will show the status of the bank regarding share holders’/investors

grievances.

Table –4.5

Status of Share-Holders’/Investors’ Grievances Committee (For the year 2013-14)



committee

Total Members-6

Chairman-NED

Total Members-4

Chairman-NED

2. Information about nature of complaint &

queries received and disposed-item wise

Not disclosed item wise

number

unattended complaints

reports

Not disclosed item wise

number

unattended complaints

reports

3. Information about number of committee

meetings

Total Meetings-4

1 attended-4

3 attended-3

1 attended-2

2 attended-1

Total meetings-4

3 attended-4

1 attended-3

4. Information about investors/

Shareholders survey conducted

No such survey conducted No such survey

conducted

5. Publishing of committee report Not published in corporate

governance report

Not published in

corporate governance

report





Source – Annual Reports of SBI & HDFC

TM - Total Members in shareholder’s Grievances Committee

NED - Non-Executive Directors

ID’s - Independent Directors


All requirements of clause 49 of the listing Agreements in regard to composition of

shareholders grievance committee are followed by SBI as well as HDFC.

In both banks total meetings are four in a year.

Attendence of members in meeting are better in HDFC than SBI.

Number of members in SBI are more than HDFC.

Committee chairman also Non-Executive Directors in both banks

4.6 Remuneration Committee

A company must have a credible and transparent policy in determining and accounting for the

remuneration of the directors. The policy should avoid potential conflicts of interest between the

shareholders, the directors the management. The over-riding principle in respect of directors

remuneration is that of openness and shareholders are entitled to a full and clear statement of

benefits available to the directors.

Table –4.6

Status of Remuneration Committee (For the year 2013-14)



committee

Total Members-4

1- Govt. nominee

Director

1- RBI nominee

Director

2- Other Director

Total Members-4

Chairman- NED

ID-4 (all)

2. Information about Remuneration of

Directors

Disclosed Disclosed

3. Information about nature of complaint

& queries received and disposed-item

wise

Not disclosed item-wise

break up. Not complaints

pending reports

Disclosed item-wise break

up. Not complaints

pending reports

4. Information about number of

committee meetings

Total meeting-1 Total meeting-7

3 atended-7





1 attended-6

5. Information about investors/

shareholder survey conducted

No such survey conducted No such survey conducted

6. Publishing of committee reports Not published in corporate

governance reports

Not published in corporate

governance reports



There is no-information about non-executive director and independent director in

transparency in composition of the committee by SBI but HDFC fulfilled all these

information.

Both banks are disclosed Remuneration of directors in Annual report.

Only one meeting held by SBI bank in a year but HDFC met 7 meetings.

SBI has not published committees report but HDFC has published its report.

4.7 Statutory Disclosures

1) Disclosure and treatment of related party transactions –

This is an important disclosure. Disclosures is to be made on materially significant related party

transactions i.e. transactions of the company of material nature, with its promoters, the directors

or the management, their subsidiaries etc that may have potential conflict with the interest of

company at large. (Birla Committee 1999).

2) Non-Compliance related to capital market –

Details of non-compliance by the company penalties and strictures imposed on the company by

SEBI or any statutory authority on any matter related to capital market during the last three years

should be disclose in the annual report of the company.

3) Accounting Treatment -

As per the Narayan Murthy report (2003) on corporate governance companies, while preparing

financial statements a treatment different from that prescribed in an accounting standard has been

followed, the fact should be disclosed in the financial statement, together with the managements

explanation as to why it believes such alternative treatment is more representative of the true and

fair view of the underlined business transaction.

4) Risk Management -





Management should place a report, before the entire board of directors every quarter

documenting the business risk faced by the company measures to address and minimize such

risks and any limitations to the risk taking capacity of the corporation. This document shall be

formally approved by the board (Narayan Murthy Re).

The board, its audit committee and its executive management must collectively identify the risks

impacting the company’s business and document their process of risk identification, risk,

minimization, risk optimization as a part of risk management policy or strategy. The board

should also affirm that it has put in place critical risk management framework across the

company which is overseen once every six months by the board. (Naresh Chandra Committee

2009)

5) Management Discussion & Analysis –

As a part of the disclosure related to management it is recommended that as part of the directors

report or as an addition there to a management discussion and analysis report should form part of

the annual report to the shareholders. This management discussion & analysis should include

discussion on the following matters within the limit set by the company’s competitive position-

Industry structure and developments.

Opportunities and threats.

Segment wise or product wise performance.

Outlook.

Risks and concerns.

Internal control systems and their adequacy

Discussion on financial performance with respect to operational performance.

Material developments in Human Resources/Industrial Relations front including number

of people employed.

6) Shareholder Information –

A) It is recommendatory that in case of the appointment of a new director or reappointment

of a director the shareholders must be provided with the following information-

A brief resume of the directors

Nature of his expertise in specific functional areas





Name of companies in which the persons also holds the directorship and the membership

of committees of the board.

B) Information like quarterly results, presentation made by companies to analysis may be

put on company’s web-site or may be sent in such a form so as to enable the stock exchange on

which the company is listed to put it on its web-site. (Birla Committee 1999)

Table –4.7

Item of Statutory Disclosures/Requirements and their status of Compliance

For the year 2013-14

Source : Annual Report of SBI & HDFC


Both banks have not entered into any materially significant related party transaction that

may have potential conflict with the interest of the bank.

S.No. Items of Statutory Disclosures SBI HDFC

1. Significant related party transactions

having potential conflict with the

interest of the company

The Bank has not entered

into any materially

significant related party

transaction that may have

potential conflict with the

interest of the Bank.

The Bank has not entered

into any materially

significant related party

transaction that may have

potential conflict with the

interest of the Bank.

2. Non-compliance related to capital

market matters during the last 3 years.

No penalties or strictures

have been imposed

No penalties or strictures

have been imposed

3. Accounting treatment Applicable accounting

standards are followed

Applicable accounting

standards are followed

4. Board Disclosure Risk-Management Laid down procedure to

inform board member

about risk assessment and

minimization for

boards review reports

Laid down procedure to

inform board member

about risk assessment and

minimization for

boards review reports

5. Management discussion and analysis

(MD & A)

MD & A report formed

part of annual report

MD & A report formed

part of annual report

6. Shareholder information on :

Appointment of new directors

reappointment of retiring directors

Quarterly result & presentation

Share-transfers

Director’s responsibility Statement

Disclosed Compliance

Disclosed Compliance





Non-Compliance related to capital market matters during the financial year. There were

no penalties or strictures have been imposed.

Accounting standards are followed by both the banks for accounting treatment.

Management discussion and analysis & shareholders information also disclosed in

Annual report.

5.8 Non-Mandatory Disclosures

1) Shareholder’s Rights –

The basic rights of the shareholders include right to transfer and registration of shares, obtaining

relevant information on the company on a timely and regular, basis, participating and voting in

shareholder meeting electing members of the board and sharing in the residual profiles of the

corporation. Shareholders have a right to participate in and be sufficiently informed on decisions

concerning fundamental corporate change they should not only be provided information as under

the companies Act, but also in respect of other decisions relating to material changes such as

takeovers, sale of assets or divisions of the company and changes in capital structure which will

lead to change in control or may result in certain shareholders obtaining control disproportionate

to the equity ownership. (Birla Committee 1999)

2) Audit Qualification –

Company must move towards a regime of unqualified financial statements.

3) Training of Board Members –

A company may train its board members in the business model of the company as well as the

risk profile of the business parameters of the company, their responsibilities as directors and the

best ways to discharge them.

4) Evaluation of Non-Executive Directors -

The performance evaluation of non-executive directors could be done by a peer group

comprising the entire board of directors, excluding the director being evaluated and peer group

evaluation could be the mechanism to determine whether her to extend/continue the terms of

appointment of non-executive directors.

5) Whistle Blower policy –





A company should establish a mechanism for employees to report to the management concerns

about unethical behavior, actual or suspected fraud or violation of the company code of conduct

or ethics policy. The companies should also provide for adequate safeguards against

victimization of employees who avail of the mechanism and also allow direct access to the

chairperson of the audit committee in exceptional cases. The mechanism must also provide

where senior management is involved, direct access to the chairman of the audit committee.

Once established the existence of the mechanism may be appropriately communicated within the

organization.

Table –4.8

Item of Non-Status Mandatory Disclosures/Requirements and their status of Compliance

For the year 2013-14

Source:Annual report of SBI & HDFC

Observation from Table 5.8

S.No. Items of Statutory Disclosures SBI HDFC

1. Shareholder right

(e.g. information & half yearly

declaration of financial

performance sent to shareholders)

Disclosed on a website &

in News Paper. Also sent

Disclosed on a website &

in News Paper. Also sent

2. Audit Qualification Disclosed in corporate

governance report

Disclosed in corporate

governance report

3. Training of Board member No-information provided

in corporate governance

report



report

4. Evaluation of Non-Executive directors Information provided in


report



report

5. Whistle Blower Policy Information provided in


report



report





In a year 2013-14 banks have disclosed shareholder right and whistle blower policy

adopted by bank in corporate governance report.

Other Non-Mandatory requirements are not clearly informed in corporate governance

report.

5. CONCLUSIONS

It is observed that SBI is keen implementing best practices with regard to Corporate Governance

practices. The positive aspects of SBI Corporate Governance practices include board Corporate

Governance Philosophy, requisite and sufficient number of board members with large

representation of non-executive directors. Another position aspect of SBI Governance practices

in enhancing Corporate Governance practices year by year.

Some negative aspects like not disclosing information on dematerialization of shares whistle

blower policy, review of chairman of various committee and director seeking appointment or re-

appointment information is not given in the annual report. The market leader of banking sector of

India is SBI, as India is a liberalized economy like all banks have to enhance its Corporate

Governance practices proactively to achieve excellence in Corporate Governance and financial

performance.

REFERENCE LIST

1. www.sbi.co.in/user.htm

2. Dr. Meenu Maheshwari, Neesha Meena, “Corporate Gov”

3. www.sebi.gov.in/commercereport/corpgov.html.

4. Dr. Meenu Maheshvari, Dr. Ashok Kumar Gupta, Nisha Meena, Corporate

Governance: A Review of Literature,(April-Sep.2011).International Journal of

Economics and Managerial thoughts, Vol.2(1)

5. Puahkar Gupta, Corporate Governance in Indian Banking sector, (2007-2008)

edissertations nattinghan.ac.uk/1888/1/08 MA lix pg.-3

6. R. Chakrabarti, w.meyginson & P.Yadav, Corporate Governance in India.

7. Ankit Katrodia Corporate Governance practices in the Banking sector, Abhinav journal

National monthly refereced Journal of Research in Commerce & Management Vol. No.

1, Issue No. 4

http://www.sbi.co.in/user.htm

http://www.sebi.gov.in/commercereport/corpgov.html





(www.abhinavjournal.com)

8. Introduction of Corporate Governance 001167

www.newage publishers.com

9. Mr.Bhavik M. Pancharara, Dr. Shailesh J. Parmar Department of Commerce & Business

Administration Saurashtra University , Rajkot. “An Empirical Study on Corporate

Governance in India Banking Sector”.

http://etheses.saurashtrauniversity.edu

10. Roger M. Barker, “Insider, outsiders and change in Europeon Corporate

http://www.abhinavjournal.com/

http://etheses.saurashtrauniversity.edu/

Documents

corporate governance practices: a comparitive study of sbi & hdfc