The impact of micro-level interventions initiated by the Reserve Bank of India (RBI) on the basis of the recommendations of the Advisory Committee on Corporate Governance is supposed to be reflected in the post-implementation period financial indicators of Indian banks. On the basis of 22 samples, the empirical study of the last five years, both at the aggregate and group levels, however, provides an inconclusive inference about the association of governance and performance. The statistically insignificant relationships and non-impact on key variables like asset quality, cost of capital, capital adequacy and profitability suggest that in the Indian context, corporate governance (CG) appears to be a non-determinant factor.

The search for the correct answer to the question, `Whether Corporate Governance (CG) affects bank performance?', is still continuing even as the problem is being approached from several angles. Most of the researchers all over the world have tried to link the performance of banks with the ownership changes. In a recent study on banks operating in South East Asia, Williams and Nguyen (2005) found that the ownership change brought by privatization of banks has raised their performance. The main finding of a study on 81 banks from 22 developing countries (Boubakari et al., 2005) and another study on Argentina (Berger et al., 2005) also suggest similar line of conclusion. Privatization/foreign acquisition/deregulation/liberalization/restructuring vis-à-vis bank performance relationship are common studies all over the world, so also in India (Bhattacharyya et al., 1997; Ram Mohan, 2002; Das et al., 2004). Many other similar type of studies establish a linkage between macro-level policy changes and performance of banks in different countries and regions.