The Punjab National Bank scam: ethics versus robust processes

Abstract

With the rising incidents of corporate scams, it has become imperative to lift the corporate veil to unearth the reasons behind them. As a result, it is of paramount importance 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 stringent 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 agencies 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.