Corporate Governance Scandals in India's Banking and Financial Services Sector

In this chapter, we adopt a sector-specific approach to corporate scandals in one jurisdiction, namely India, to examine how corporate governance factors contributed to the scandals on the one hand and how the scandals have either resulted in governance reforms or merit further legal or regulatory transformations on the other. In doing so, we train our sights on the banking and financial services (BFS) in India.

After highlighting the specific attributes in governance for BFS companies, including in the Indian context, we outline our aims for the chapter and briefly set out its roadmap. We explore three research questions. First, we consider whether and how poor corporate governance norms and practices contributed to the BFS scandals in India over the last decade. This is essentially the contribution question. Second, we explore the reforms, if any, that were introduced to the laws and regulations relating to corporate governance in the aftermath of these scandals. This covers the reformation question. Finally, we deliberate on reforms that are still required to be carried out based on the learnings from these governance scandals in BFS companies: the normative question. In examining our research questions, while we focus on the governance scandals in BFS companies in India, we seek to make comparisons to international examples to the extent necessary.

We structure our chapter essentially along the lines of three broad contributive factors that have led to scandals in BFS companies in India, and highlight the reformative and normative factors relating to each of them. For each, we select one case study involving a recent governance scandal in a BFS company in India within the last decade. The YES Bank episode (2020) illustrates the risks of star-promoter control, excessive risk-taking and wealth tunnelling. The IndusInd Bank accounting scandal (2025) highlights the failure of internal and external gatekeepers, particularly the board and auditors. The IL&FS crisis (2018) demonstrates how regulatory fragmentation, regulatory arbitrage and inter-regulatory turf wars can contribute to systemic failure. Taken together, the cases demonstrate that these governance failures require more than piecemeal responses, calling instead for a wholesale reconsideration of the corporate governance framework applicable to BFS companies.