Final project

on
PUNJAB NATIONAL BANK SCAM

Submitted by:

Aishwarya Sahai – 19A1HP048

Vineet Nair -19A3HP620
Kshitij Vijay - 19A2HP449
Sathraja 19A1HP136
Khushboo Mittal- 19A2HP436
Naman Chahal - 19A3HP654
 Indian Corporate governance model & guidelines

Internal Environment External Environment

 Company mission  External Stakeholders
 Vision  Government regulations,
 Policies policies, rules, etc.
 Norms  Company’s act, SEBI,
 Internal Stakeholders Stock exchange.
 Auditors  Corporate structure,
 Board of Directors characteristics,
influences.
 Internal Environment
Investors, employees, board of Internal
directors, managers, operation Stakeholder
There are 4 executive directors
teams, internal customers.
and three other directors.
Board of
Director
PNB follows the regulatory M/s Suri & Co., M/s G S
Auditors Mathur & Co., M/s M K P S &
norms suggested by RBI.
Associates, M/s S.P M G &
Norms Company
Insurance policy, PNB home loan
policy, PNB education loan
policies. Policies
To position PNB as the ‘Most
Preferred Bank’, the `Best Place to
Vision Work In’ &
Creating Value for all its
Benchmark of Excellence’ for the
customers, Investors and Company industry.
Employees. mission
 General Manager
Management or Zonal
Manager
Chief Manager or
Level in PNB Regional Manager or
Branch Manager

Senior Manager
or Branch Scale-VII
Manager Deputy General
Scale-VI Manager or Zonal
Officer or
Deputy
manager
Scale-V
Chief Manager or Regional
Scale-IV Manager or Branch Manager

Scale-III
Manager or
Scale-II Branch manager

Scale-I
 Organizational Control Centres
Top Executive Grades
(Chairman and Board of Corporate goal and
Directors, Scale – VII & strategic control
Grades/Centres

Scale-VI Managers)

Responsibilities
Senior Management Grade
Management control
(Scale - V & IV Managers)

Middle Management Grade Operational control

(Scale-Ill & II Managers)

Junior Management Supervisory function or

Grade (Scale- I Managers) control
 Organization Structure of PNB

ZONAL REGIONAL BRANCH

HEAD OFFICE OFFICES OFFICES OFFICES
(18) (56) (4022)

***Special Committee of Boards: For monitoring fraud cases, the special

committee was constituted during the year 2003-04 for monitoring and follow up of
fraud cases involving amount of Rs. One Crore.
Organization Structure at Branch Office Level

The objectives functions of branches are:

 Execution of policies and planning of Head offices, which have been directed through Zonal
offices and Regional offices.

 Achievement of targets.

 Customers satisfaction and counselling of customers.

 Communication of customers' needs and marketing.

 opportunities to the superiors.

 Maintenance of customer accounts.

Customer Segmentation as adopted by PNB
Organization Structure at Branch Office Level
(Cont.)

 Large Corporate- Those clients to whom fund based and non-fund-based facilities
sanctioned by bank are over Rs.12 Crore or whose annual turnover is over Rs.100
Crore.

 Mid Corporate- Those clients to whom banks credit exposure is between Rs.3.5
Crore and Rs.12 Crore.

 Regular Premium- Average saving balance of more than Rs. 10,000/- or average
current account balance of more than Rs. 50,000/-.

 Regular ordinary- Average saving balance of less than Rs. 10,000/- or average
current account balance of less than Rs.50,000/-.
 11
Corporate governance theories
Agency Theory: Agency theory states that shareholders are the principals as they have the
ownership of a company. In case of PNB bank, the major stakeholders are the Promoter and
Promoter group which consists of the Central Government/State Government(s) and the
President of India who were the most affected due to this scam.

Fair and accurate financial Efficient and independent board of

disclosure: directors:

The agents at PNB deliberately PNB bank has introduced: a

bypassed the bank CBS and issued
Letter of Understandings without
reporting them in the system.
Government of India nominee
director, RBI nominee director and a
Share holder director. This will help
the shareholders in reducing agency
costs.
 12

Stewardship theory:

 This theory suggests that the board of

directors should be made up of corporate
insiders.

 In case of PNB bank, few of the managers

were the ones who issued fake LoU’s to
Nirav Modi for the satisfaction of their
personal objectives.

 Multiple managers were involved in the

scam helps us understand that this theory
cannot be implemented solely.
 13

Good Corporate Governance

Obligation Obligation
towards to society
customers at large

01 02 03 04 05
02 03 04 05

Obligation Obligation Managerial

Toward towards
Obligation
investors employee
The Principles of Personal Ethics violated in the PNB scam

01
Roles & liabilities of a director & board of directors towards all other
forces.
 16

The role of the Board in making a domain where a company can succeed is the way to future achievement of
the business.
The key functions of BODs in corporate administration are as per the following:

Exercise accountability to
Establish vision, shareholders and be
Delegate to management responsible to relevant
mission and values
stakeholders

 To decide the company's  To Delegate responsibility to  To ensure Proper 2-way

vision and mission
 To decide the values to be
promoted throughout the
company.
 To decide and review
company goals.
 To decide company
policies
management, and monitor,
and implementation of
policies, and business plans.
 To Decide on
Control/Monitor criteria to
be used by the board.
 To ensure that internal
controls are efficient.
communication between
shareholders and
stakeholders.
 To Understand and work upon
the interests of shareholders.
 To promote the goodwill and
support of shareholders and
relevant stakeholders.
 Key Responsibilities & duties of BODs
Directors take care of the undertakings of the organization and are in a place of trust.

They may manhandle their situation to benefit to the detriment of their

organization, and, thusly, to the detriment of the investors of the organization.

The directors should consistently practice their forces for a 'Proper Purpose' – that is, in promotion
of the purpose behind which they were given those forces by the investors.

Directors must act within rules, law and with common decency in what they sincerely accept to be the
eventual benefits of the organization, and not for any insurance reason.

Directors must act with due ability and care & must think about the interests of workers of the
organization.
Conceptual Framework
This model clarifies that the board
members ought to be responsible,
reasonable and straightforward in all
that they do in the corporation.

This outcomes in solid cohesiveness and

at last outcomes in great business
execution.
Corporate Governance influences
endurance and business execution
among different chose associations and
at last investors esteem.
 Consequences and post scam 19

changes in PNB
Public sector
 Regulators: RBI instructed PNB to pay all debts to other Regulators
banks
banks & stopped banks to issue LOU.
 Public sector banks: Other public banks started to look 01 02
back on every defaulter to check if they are genuinely
pressurizing or just fooling them.
 Stock Market: The stock price of PNB has fallen down Business
Geethanjali 06 Solutions
03 Stock
from rupees 160 to 95.5 rupees on 9th March’ 2018.
 Customers of the PNB: Customers lost their trust on the Franchise Market
bank and started to know about the money they
deposited in it.
 Nirav Modi Employees: Sanjay Rishi (American express), 05 04
Gautham Mukkavilli (Ex. Executive PepsiCo), Suresh
Nirav Modi Customers of
Senapaty (Ex. CFO of Wipro) and others.
 Geethanjali Franchise: Hari Prasad SV, a resident of Employees the PNB
Bangalore and franchisee jeweller of Geetanjali Groups
was the one who alerted the prime minister office on
26july, 2016 about this fraud.
Changes implemented to improve corporate
governance (post scam)

With an aim of not to hit by any

other scam, Punjab National
Bank has embarked Mission
Parivartan – each letter of the
parivartan is a guiding force for
the bank to attain long term
success
 As part of their participative
There think-tank practice approach, PNB has created ‘Lead
follows a bottom’s up the Parivartan’ portal to involve
approach to involve all in all the transformation process
and started encouraging
internal stakeholders in
policy making process. suggestions and ideas from all
PNBians.
Bank has appointed a
separate group to track and
Built a separate vertical for
make sure that cash flow
stressed asset recovery.
from projects is being used
to repay bank loans.

To ensure timely To improve audit systems, Also entered digital era

intervention, PNB has PNB incorporated analytics through mobile banking
implemented automating and AI (Artificial with a motive of providing
customer response Intelligence) for all financial services with a
mechanism. reconciliation of accounts. single click.
THANK YOU..