This article first appeared in DNA India on Feb 22nd 2018.
Punjab National Bank (PNB) has been in the news for all the wrong reasons. The scam involves the sanctioning of Letters of Understanding (LoUs) to Nirav Modi and his companies without accompanying credit limits or margin money being paid to the bank.
As expected, when the scam broke, the senior leadership at PNB quickly tried to regain the high moral ground by finding scapegoats who they could pin the blame on.
Over the last 2-3 days, a number of mid-level functionaries of the bank have been arrested for providing LoUs to Nirav Modi and his companies without any accompanying collateral and for fudging the books to not reflect this undertaking.
Let’s just step back and take a look at what this means. From most accounts, Modi and his firms owe PNB to the tune of Rs 11,000 crores.
Yet we are led to believe that all this happened because of some junior staff without any connivance on the part of senior members of PNB.
Is this even believable?
I had gone to address another large government bank on HR Analytics. The goal of the CEO was to enhance transparency in the system by using the power of data and analytics.
However, from what I saw there, I was skeptical of the exercise fetching any result.
What jumped out at me, although not to my surprise I must add, was the entrenched hierarchy in the organisation.
The meeting involved all middle and senior management of the bank.
A dais was set up that had a long table and on it were the executive board members.
Below the dias, on both sides of it were a series of tables and chairs for the next level of managers. Finally, facing this group were the junior- to mid-level managers.
A system so rigid that even seating arrangements were based on one’s place in the pecking order is surely not set up right to change.
All talk of innovation, transparency and adaptability falls flat when even seating arrangements are dictated by one’s position in the organisation.
Obviously, in such a setup, the HiPPO effect comes into play, that is, the HIghest Paid Person’s Opinion is taken as the final word by all and sundry.
If what I saw in this bank is emblematic of other public sector banks (PSBs), then it is fairly certain that what happened with PNB could not have happened without the active connivance of senior members of the organisation. In addition, what it also points to is a breakdown of the many processes that are meant to protect the banks as well as the depositors from precisely this kind of a scenario. A breakdown on this massive a scale, with such large amounts, cannot be written off as the doings of a bunch of mid-level government servants. If the claims of an ex-director of the board are true, even the current director was in the know about the goings on.
While the great game of passing the buck begins now, it would be good for the senior leadership to be hauled over the coals since they bear ultimate responsibility for what happened within their organisation.
All other attempts at pinning the blame on a bevvy of mid-level functionaries is nothing better than hogwash!