The Punjab National Bank scam: Ethics versus robust processes

• Author: Vidula Worlikar,Kaushik Dora Hanumantu,Sundaravalli Narayanaswami
• Published date: 01 November 2019
• Date: 01 November 2019
• DOI: http://doi.org/10.1002/pa.1952

ACADEMIC PAPER

The Punjab National Bank scam: Ethics versus robust processes

Kaushik Dora Hanumantu |Vidula Worlikar |Sundaravalli Narayanaswami

Public Systems Group, Indian Institute of

Management, Ahmedabad, Ahmedabad,

Gujarat, India

Correspondence

Kaushik Dora Hanumantu, Public Systems

Group, Indian Institute of Management,

Ahmedabad 380015, Gujarat, India.

Email: p17kaushikd@iima.ac.in

With the rising incidents of corporate scams, it has become imperative to lift the cor-

porate veil to unearth the reasons behind them. As a result, it is of paramount impor-

tance to examine the formation of the companies entering into the contract—the

executives, directors, and top management. A large‐scale scam hit the Punjab

National Bank (PNB) in India recently with huge implications on its financial position

and credibility. It is inferred through this work that violation of checks and balances

led to the huge scam. Following this scam, several banks have initiated measures to

prevent and early detect such manipulative practices. Banks have incorporated strin-

gent verification of all stakeholders involved in any transaction and do not completely

rely anymore on the Society for Worldwide Interbank Financial Telecommunications

system. The Reserve Bank of India, as the apex governing body of all banking agen-

cies in India, has also started taking measures to ensure that monitoring and control

mechanisms are strong and robust. Finally, we present the way forward to prevent

malpractices in the corporate world and the ethical implications in the society.

Although any organization, especially, a public service organization does not allow

any perpetrators into its systems, loopholes might exist that its internal or external

stakeholders take advantage of. While emphasizing the needs for robust monitoring

and audit processes to prevent violation by perpetrators, it is interesting to note that

the same monitoring processes have brought out the scam to open for legal scrutiny,

specifically at PNB.

1|PUNJAB NATIONAL BANK: AN

OVERVIEW

Punjab National Bank (PNB)

1

is an Indian multinational banking and

financial services company head‐quartered in New Delhi. PNB was

establishedin1894duringaperiodwhenPunjabwaswitnessingrapid

development and the patriotic Punjabi society was filled with aspirations

for freedom and ambition for swadeshi

2

bank with Indian capital(Retrieved

from official website of PNB, n.d).

3

Hailing from different parts of the coun-

try, the founding members were of the vision to provide a truly national

bank to the country. The bank opened for business for the first time in

1895. Eventually, in 1969, as part of the banking policy reforms, PNB

was nationalized by the Government of India along with 13 other banks.

As of June 2018, PNB has more than 100 million customers (PNB

official press release, n.d),

4

spread across 6,983 national branches and

100+ international branches operating in more than 750 cities. It has a

banking subsidiary in the United Kingdom and branches in Kowloon,

Dubai, and Kabul. It has a stake in Druk PNB bank, Bhutan (51%),

Everest Bank Ltd., Nepal (20%), and JSC PNB bank, Kazakhstan

(84%). In Almaty, Dubai, Oslo, Shanghai, and Sydney, PNB has its repre-

sentational offices. PNB was operating 9,668 ATMs as in March 2018.

PNB boasts a huge rural presence (Profile of Punjab National Bank,

n.d),

5

with 37% of its branches located in rural areas. Nineteen percent

of its branches are in the metros, whereas 25% are located in semi‐

1

https://en.wikipedia.org/wiki/Punjab_National_Bank.

2

Hindi word for National.

3

Retrieved from official website of PNB, accessible at https://www.pnbindia.in/origin‐of‐

PNB.html.

4

https://www.pnbindia.in/downloadprocess.aspx?fid=HB3rVjGuVzmJHRXB+IKtNQ==.

5

https://www.pnbindia.in/downloadprocess.aspx?fid=lwS2UC0Bvme58fKJBnQ9ew==.

Received: 4 March 2019 Accepted: 31 March 2019

DOI: 10.1002/pa.1952

J Public Affairs. 2019;19:e1952.

https://doi.org/10.1002/pa.1952

© 2019 John Wiley & Sons, Ltd.

wileyonlinelibrary.com/journal/pa 1of12