PNB tightens staff transfer policy to ensure irregularities do not recur

Recap not discussed, PNB may approach govt for additional funds

Fraud-hit Punjab National Bank (PNB) on Monday held its board meeting for five hours and decided to replace the current tax transfer policy with strict as well as clear norms to ensure that such irregularities do not recur. The board also resolved that internal and external auditors must ensure that system procedures, particularly those involving SWIFT and forex transactions, are followed in all the branches.

Though the meeting did not discuss plans to approach the government seeking more recapitalisation funds, sources said the bank was assessing its liabilities after the fraud. The assessment will take a week, after which it might go to the government for additional funds, they said.

The meeting also did not take up the integration of SWIFT with core banking solution (CBS), but sources said it would be done by March-end, a month ahead of the deadline issued by the Reserve Bank of India.

“The board decided that there should be no laxity in the staff transfer policy. In some places, the transfer policy was not implemented. We found casualness and delay in transfer of staff,” a source told Business Standard.

The sources said the bank’s zonal manager (general manager level) from Mumbai had been moved to the headquarters in Delhi. Also, the GM dealing with risk management in Delhi had been transferred to Mumbai, they revealed.

It has been alleged that certain employees involved in the scam remained in the same position and the same branch for a very long time in violation of the human resources (HR) policy.

Following the fraud, PNB has transferred 1,415 employees.

“...the Bank has transferred 257 sub staff, 437 clerks and 721 officers (total 1,415 employees) since February 19, 2018, as per the prevailing Rotational Transfer Policy of the Bank,” PNB had said in a statement.

Earlier, there were reports that the bank had transferred close to 18,000 employees, but the bank had denied those reports as “factually incorrect”. “The board said that both internal and external auditors mut ensure compliance with all regulatory norms,” one of the sources said.

Prime Minister Narendra Modi and Finance Minister Arun Jaitley have questioned the management and auditors of the bank and the RBI in the aftermath of the fraud. Chief Economic Advisor Arvind Subramanian had said the internal audit of the bank broke down and he wondered what the external auditors were doing. 

Integration of SWIFT with the bank’s CBS would happen by March-end,  against the RBI’s directive to do so by April 30, sources said. 

Though Finacle 10, an updated banking software from Infosys, did not integrate SWIFT with CBS, it had the compatibility to do so, they pointed out. There was no compatibility in the previous versions of Finacle. “Talks are at advanced stages with Infosys to ensure that SWIFT and CBS are integrated under Finance 10,” they said. But, the board need not discuss this aspect. 

They said SWIFT had been made foolproof. “Transactions on SWIFT have been made a three-step process through the involvement of multiple executives,” a source quoted above said.

The board was apprised that CBI received explanations from  the top management on how the fraud happened. The investigative agency had earlier examined the bank’s managing director and CEO Sunil Mehta and executive director KV Brahmaji Rao. Both Mehta and Rao attended the meeting, besides the government and RBI nominees among others.

The sources said it would take a week for the bank to assess the total liabilities arising out of the fraud. After that, it may approach the finance 

ministry for additional equity infusion.

PNB received Rs 54.7 billion in 2017-18 as part of the government’s Rs 2.1 trillion bank recapitalisation plan, which is spread over two years and includes a Rs 1.35 trillion bond programme.

In fact, the bank has called an extraordinary general meeting next month to approve giving a matching portion to the government through preferential shares.