The purpose of the study is to determine how market competition and corporate governance affect bank performance (measured by profitability and asset quality). Additionally, it seeks to determine how market competition influences the governance and performance link in Indian banks between 2005 and 2022. The study primarily employs a technique of two-step system generalized method of moments, and a propensity score matching technique is applied to support our investigation. The study shows that adhering to corporate governance standards enhances bank profitability and decreases non-performing assets in India, while market concentration adversely impacts bank performance. Furthermore, the study indicates that corporate governance is more significant in low-market competition environments. The study reveals an intriguing ‘substitutive’ link between market competitiveness and corporate governance. Finally, it concludes that effective governance practices such as an effective board, transparency, board committees and shareholder rights are crucial during periods of declining profitability, poor asset quality and bank mergers.