Eyes wide shut

The PNB fraud belies the stringent code of conduct the bank has put down on paper

It was quite something to get a text message from Punjab National Bank (PNB) a few days ago, hardselling an “investment plan’’ that offered good returns along with insurance cover and tax-saving sops. At a time when various angles of the Rs 127-billion fraud involving PNB are being investigated, that SMS from an agency outsourced by the bank made one sit up. Is the bank trying to add new customers when the existing ones are possibly thinking of moving out due to uncertainty and nervousness? With questions flying all over the place on how safe it was to keep deposits in PNB (or any other bank) as the probe widens, it looked like a good idea to go back to the origin and find out more about the fraud-hit organisation.

 
PNB, known as the country’s first “swadeshi’’ bank, was started almost 125 years ago from Lahore, with a working capital of Rs 20,000, according to information provided on its official website. The project, with plenty of nationalism of a different kind, was led by swadeshi activists and entrepreneurs. For instance, freedom fighter Lala Lajpat Rai is said to have been closely associated with the bank in its early years.
 
PNB likes to describe “brand image’’ as its core strength and words like “security’’, “gandhigiri’’ (following Mahatma Gandhi’s ideologies), “rin mukti’’ (debt free) and “bharosa ka prateek’’ (symbol of trust) are used to define the bank on various platforms, some basic research shows. The warnings are loud and clear too, with an overload on “prevention of fraud’’. A net banking platform cautions, “to prevent fraudulent payment of cheques in your accounts, please avail PNB Suraksha Scheme...’’ Another window says, “It allows customers to access the various features of banking over a secure channel.’’ In contrast to many private banks, PNB lists out many security tips — do not reveal passwords over phone/email etc to any person including the bank, change your password regularly, keep your password a combination of alphabets, special characters and numbers, use on-screen keypad for logging when you are not using your own PC. Going by the long list of security mechanism it lists, it’s hard to imagine how some diamond merchants and their team could get a free run at PNB.

 

Not only does it showcase and claim, but PNB’s achievements have been recognised as well during the same period that the fraud may have been at its peak. It won Dun & Bradstreet Banking Awards 2017 for success in Pradhan Mantri Mudra Yojana, a flagship scheme of the government. It was also adjudged best under the large category bank by the Ministry of Rural Development.
 
While PNB has made LoUs (letters of understanding) a household term, the bank claims to be following guidelines (at least on the paper) made of steel and iron. The code of conduct is especially telling in the context of the Nirav Modi case. It says, “The bank acknowledges the need to uphold the integrity of every transaction it enters into and believes that honesty and integrity in its internal conduct would be judged by its external behaviour. The bank shall be committed in all its actions to the interest of the countries in which it operates. The bank is conscious of the reputation it carries amongst its customers and public at large and shall endeavour to do all it can to sustain and improve upon the same in its discharge of obligations. The bank shall continue to initiate policies, which are customer centric and which promote financial prudence.’’

 
Then, the code goes on to elaborate, “the bank expects all its directors and members of the core management to exercise good judgement, to ensure the interests, safety and welfare of customers, employees and other stakeholders...’’ Also, the directors of the bank and core management must comply with applicable laws, regulations, rules and regulatory orders, it says. “They should report any inadvertent non-compliance, if detected subsequently, to the  concerned authorities.’’
 
It is clear now that the board of directors at PNB also fell victim to the systemic failure in the organisation and the banking universe. Despite the stringent codes, the directors, who are supposed to be the supreme watchers, couldn’t arrest the mega fraud playing out over many years cutting across two political regimes. Although there have been allegations in the past of politicians having a role in the running of several public sector bank boards, the current directors at PNB — 11 of them including the non-executive chairman, managing director, government nominee and Reserve Bank of India nominee — are mainly bankers, chartered accountants, bureaucrats and business executives. Even so, the PNB board has emerged a silent watcher, perhaps with eyes shut.