The Reserve Bank of India (RBI) in its credit policy has mentioned that a big thrust on governance reforms is needed to inspire trust and confidence in potential investors.
“The medium-term challenge is to improve the investment climate and expand the absorptive capacity of the economy... the second big task is a big thrust on governance reforms that should inspire the trust and confidence of potential investors,” the central bank said in its policy statement.
Most fund managers are unanimous in their view that corporate governance standards are far better than those in most emerging markets.
For instance, despite China’s economy growing at a faster rate than that of India, the latter is a preferred destination for global portfolio investors, because of better disclosure norms and governance standards.
“On a relative basis, India fares much better than most other emerging markets when it comes to corporate governance. I don’t think there is much dispute about that,” says Navneet Munot, chief investment officer, SBI Mutual Fund.
“True, there may have been a few instances of rules having been violated. But then, those are one-off issues, and that is the case even with developed markets, ” he says.
Agrees another fund manager at a private insurance firm. “Corporate governance issues are not what are holding investors back at this point.... they are more worried about other things like the economic slowdown and high fiscal deficit,” said the fund manager, who did not wish to be named.
“Corporate governance is a combination of structural features and qualitative aspects,” says Pawan Agrawal, director, corporate and government ratings, Crisil. “The structural features are driven by regulatory requirements, such as the frequency and extent of disclosures to be made to the stock exchanges, regulations on independent directors on a company’s board, etc. On this front, India is much better placed compared with most of its peers in the emerging markets space.
“The other aspect is a qualitative assessment of how governance is followed in practice. It is hard to generalise on the qualitative aspect of governance, as it differs in varying degrees across companies. So, a (Indian) company can adhere to most of the regulatory requirements, but we need to assess the spirit with which governance process is adhered,” he adds.
“The medium-term challenge is to improve the investment climate and expand the absorptive capacity of the economy... the second big task is a big thrust on governance reforms that should inspire the trust and confidence of potential investors,” the central bank said in its policy statement.
Most fund managers are unanimous in their view that corporate governance standards are far better than those in most emerging markets.
For instance, despite China’s economy growing at a faster rate than that of India, the latter is a preferred destination for global portfolio investors, because of better disclosure norms and governance standards.
“On a relative basis, India fares much better than most other emerging markets when it comes to corporate governance. I don’t think there is much dispute about that,” says Navneet Munot, chief investment officer, SBI Mutual Fund.
“True, there may have been a few instances of rules having been violated. But then, those are one-off issues, and that is the case even with developed markets, ” he says.
Agrees another fund manager at a private insurance firm. “Corporate governance issues are not what are holding investors back at this point.... they are more worried about other things like the economic slowdown and high fiscal deficit,” said the fund manager, who did not wish to be named.
“Corporate governance is a combination of structural features and qualitative aspects,” says Pawan Agrawal, director, corporate and government ratings, Crisil. “The structural features are driven by regulatory requirements, such as the frequency and extent of disclosures to be made to the stock exchanges, regulations on independent directors on a company’s board, etc. On this front, India is much better placed compared with most of its peers in the emerging markets space.
“The other aspect is a qualitative assessment of how governance is followed in practice. It is hard to generalise on the qualitative aspect of governance, as it differs in varying degrees across companies. So, a (Indian) company can adhere to most of the regulatory requirements, but we need to assess the spirit with which governance process is adhered,” he adds.
Source: http://economictimes.indiatimes.com/News/Economy/Policy/Walk-path-of-corporate-governance-win-investor-trust/articleshow/4832150.cms
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