Corporate Governance is an integral part of the Management Control System (MCS) which directly
reflects in maintaining the image and the reputation of the company and its strategy because of
global competition. In today’s fast-growing economies, the reputation of an organisation has much
important as its market value. Added to the financial crisis, the organizations are facing governance
issues which are creating reputational and other risks. To overcome these, the corporate sector is
focusing on a new concept called ‘‘Corporate Governance’’. Business ethics, Corporate
Governance and Corporate Social Responsibility have become not only an integral part of the
present globalised business environment, but also have changed the business model of banks and
they are also enforcing such issues.
Banks play an important role in the economic development of a nation as an intermediary in the
financial sector. Banks also act as the trustees of the funds of the depositors. Thus, for efficient
functioning and control in banks, an effective Corporate Governance practices should be an integral
part of bank management. Banks should have good Corporate Governance in force which should
be much more than complying with legal and regulatory requirements. The objectives of corporate
governance in the banks must cover broadly:
I. To protect and enhance shareholders value.
II. To protect the interest of all other stakeholders consisting of customers, employees and
society at large.
III. To ensure transparency and integrity in communication and to make available full, accurate,
clear information to all concerned whether public or the government or any other.
IV. To ensure accountability of the employees for work performance and in giving customer
services and to achieve excellence at all the levels of their work and services.
The role of the Board of directors, Chairman and/or CEO and Committees of the board is not only
important but crucial in governance matters. The Bank’s Board of directors should meet regularly
and to provide effective leadership and insight in business and functional areas. They also should
monitor bank’s performance of business. The Chairman and/or CEO have the responsibility for all
aspects of executive management and is accountable to the Board for the ultimate performance of
the bank and for implementation of the policies laid down by the Board. A senior executive is made
responsible in respect of compliance issues. Board level committees are also formed, to assist the
Board of directors in working and to function effectively. These committees provide effective
professional support in the conduct of Board level business in key areas and also provide inputs for
taking major decisions.
A. Elaborate the role of the Board of directors, Chairman and/or CEO and Committees of the
Board in governance matters. List some of the important committees of the Board
constituted in banks for the purpose of compliance of governance. (6 Marks)
B. State the sound corporate governance principles as outlined by the Basel Committee as
have been approved by Reserve Bank of India (RBI) also..
Answers
Explanation:
Prantik Boys Club prepared the following Receipts and Payments Account for the year ended 31 ^ (st) December, 2019: Receipts To Balance b/d To Subscription 2018 2019 2020 To Admission fees To Locker Rent To Interest on Govt. Securities { Payments 7,600 By Sports Equipment (Purchased on 1.10.2019) xi/(30, 000) 2,000 By Postage & Stationary 700 37,000 By Salaries & Wages 5,000 3,000 By Upkeep of Ground 1,000 4,000 By Electric Charges 2,300 1,000 By Tournament Expenses 8,000 1,200 By Balance c/d 8,800 55,800 ,800 40,000 The Fixed Assets of the club on 1st January, 2019, included the following: Sports Equipment Furniture 6, 000 , 10% Govt. Securities 16,000, and Club Ground 25,000. Prepare Income and Expenditure Account of Prantik Boys' Club for the year ended 31st December, 2019 and a Balance Sheet as at that date after taking into account the following information