by regulators over firms through statutes, policies and regulations. market governance denotes the use of market based controls which discipline the corporate behaviour. while stakeholder governance alludes to the direct or indirect control by various stakeholder groups having direct or indirect interest in the corporations, internal governance refers to the institutional arrangement of checks and balances within the corporation. united nations economic and social commission for asia and the pacific, “ what is good governance ” oecd principles of corporate governance sun, willian, stewart, jim and pollard, david ; “ a systemic failure of corporate governance : lessons from the on - going financial crisis ” bis central bankers ’ speeches why is corporate governance important for financial institutions? while good governance is essential for any entity, it has deeper significance for financial institutions. there are many compelling reasons, some of which are : a. financial institutions are central to economic activity – banks and a large part of the non - banking financial system ( the shadow banking system ) undertake credit intermediation. failures of financial institutions would thus impede the economic growth and would cause serious damage to the system. economies take longer time to rebound from financial crisis than the business cycle recessions. b. financial institutions operate on a higher leverage. as per a study by the bank for international settlement ( bis ) for the period 1995 – 2009, compared to non - financial institutions that had a leverage of about 3, banks operated at a leverage of 18. 3 while non - bank financial firms had a leverage of 12. 1. higher leverage makes financial intermediaries more vulnerable to shocks. from a systemic perspective, the inheren procyclicality of the financial system leads to the build up of high leverage during upturn phase of the economy which amplifies booms and busts. therefore, while the procyclicality issues need to be dealt with from a financial stability perspective, it is apparent that these financial institutions must be well governed for achieving financial stability. c. financial institutions, especially banks, deal in people ’ s savings and trust of customers forms the cornerstone of their existence. any breach of trust leading to loss of confidence is bound to lead to a run, not just on a particular bank but on others too who are perceived to have weakness or even similar business models. the non bank financial intermediaries who lose the trust of their lenders would not be able to raise resources at a reasonable cost making it hard for them to operate efficiently and profitably. all these can lead

only would the institute need to develop appropriate methodology to carry out its prime task of conducting recruitment tests for increasingly demanding clients, but it would also require to have on board dynamic professionals on its faculty to handle the core functions and emerging challenges as well as other administrative support systems staff to support the handling of these functions to precision. apart from its core task of assisting in recruitment of personnel, the institute has to widen its services and engage itself more and more in other emerging areas like providing training workshops for executives on “ interviewing skills ”, training programmes in the fields of performance appraisal, counseling services, performance counseling, team - building and organization development, manpower planning and organization restructuring and undertaking sponsored research projects, just to name a few. we in rbi have had the pleasure of associating with your institute for a number of years for the recruitment of our personnel through written examinations conducted in co - ordination with you as part of our selection process. as our bank understandably attaches a lot of value to taking in bright, young professionals as direct recruits, your institute ’ s role in helping us in building up our human resource pool has been substantial. more recently, your institute has been providing us valuable support in implementing our initiative to select “ young scholars ” under the rbi young scholars scheme which seeks to effectively carry forward our efforts to afford greater access to financial services to the vast hitherto unreached segment of our population, as well as the associated issue of bridging the extant knowledge gap in financial education and literacy in our country. as we pause and introspect, let me draw your attention to some of the future challenges that ibps would face. ibps should look into these issues so that it is able to compete globally. ( a ) it is generally accepted that the processes followed by ibps for selection are fair and transparent. ibps endeavours to select the best people from among the universe of applicants. however, for its continued relevance for the next 25 years, ibps must not only endeavour to select the best people but the most appropriate people for a job. out of my own experience as a bank chairman, i can tell you that i found very few people willing to undergo rural postings. as the indian banking system embarks on the massive goal of financial inclusion, ibps would have to ensure that candidates having compassion for poor and underprivileged, willing to work in rural areas, etc. are selected for the banking industry. the key challenge, thus