The case deliberates the series of events exposing serious shortcomings in corporate governance and risk management practices of one of India’s oldest and most venerable financial institutions but also cast a glaring spotlight on various unfathomable issues of corporate governance such as weak institutionalisation of whistleblowing mechanism, ethical lapses and regulatory oversight within the banking sector. The case provides an opportunity to understand the key components of corporate governance structure and consequences of poor corporate governance. The case highlights the responsibility of the board of directors and audit committee and discusses the changes required in the corporate governance structure necessary to ensure that such incidents do not take place. The case attempts to unearth the weaknesses in the bank’s internal processes that led to a scam of this magnitude and why it remained ongoing and undetected for several years. We found that there is a need for banks to leverage the latest advancements in technology to upgrade their internal functions and processes and make them more accountable and transparent. Further, it also opens the debate on whether public sector banks and other financial institutions should be guided solely by the profit maximisation motive, or they also meet their social obligations.

Banking fraud, corporate governance, whistleblower, internal risk and control, India

Aizenman, J., Chinn, M. D., & Ito, H. (2016). Monetary policy spillovers and the trilemma in the new normal: Periphery country sensitivity to core country conditions. Journal of International Money and Finance, 68(C), 298–330.

Bekaert, G., Harvey, C. R., & Lundblad, C. (2005). Does financial liberalization spur growth? Journal of Financial Economics, 2(77), 3–55. https://doi.org/10.1016/j.jfineco.2004.05.007

Berkes, F. (2012). Sacred ecology. Routledge. https://doi.org/10.4324/9780203123843

Cecchetti, S. G., Cecchetti, S. G., & Kharroubi, E. (2012). Reassessing the impact of finance on growth (BIS Working Paper No. 381). SSRN. https://ssrn.com/abstract=2117753

Chilumuri, S. R. (2013). Corporate governance in banking sector: A case study of State Bank of India. IOSR Journal of Business and Management, 8. 15–20. 10.9790/487X-0811520.

Chronology of Nirav Modi’s Case. (2019, March 29). The Economics Times. economictimes. indiatimes.com/articleshow/68636493.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

Cournède, B., & Denk, O. (2015). Finance and economic growth in OECD and G20 countries. http://dx.doi.org/10.2139/ssrn.2649935

Duhoon, A., & Singh, M. (2023). Corporate governance in family firms: A bibliometric analysis. IMIB Journal of Innovation and Management, 1–22. 10.1177/ijim.231174155.

Edison, H. J., Levine, R., Ricci, L., & Slok, T. (2002). International financial integration and economic growth. International Monitory Fund, 1–30. https://www.imf.org/external/pubs/ft/wp/2002/wp02145.pdf

Gakaar, S. P. (2017 August 20). PNB fraud: CBI court grants bail to ex-MD Usha Ananthasubramanian. The Economics Times. https://cfo.economictimes.indiatimes.com/news/pnb-fraud-cbi-court-grants-bail-to-ex-md-usha-ananthasubramanian/65475839.

Garg, N. (2018 October 2). PNB fraud case: ED attaches properties worth Rs 637 crore of Nirav Modi & family. Times Now. https://www.timesnownews.com/business-economy/companies/article/pnb-fraud-case-ed-attaches-properties-worth-rs-637-crore-of-nirav-modi-family/292425.

George, M. (2018 October 30). Panjab National Bank fraud: How the system was gamed? The Indian Express. https://indianexpress.com/article/explained/punjab-national-bank-nirav-modi-fraud-how-the-system-was-gamed-5069107/

King, R., & Levine, R. (1993). Finance, entrepreneurship, and growth: Theory and evidence. Journal of Monetary Economics, 32(1993), 513–542.

Kose, M. A., Prasad, E. S., & Terrones, M. E. (2009). Does financial globalization promote risk sharing? Journal of Development Economics, 89(2), 258–270.

Law, S., & Singh, N. (2014). Does too much finance harm economic growth? Journal of Banking and Finance, 41, 36–44. https://doi.org/10.1016/j.jbankfin.2013.12.020

Mehrotra, S., Mishra, R. K., Srikanth, V., Tiwari, G. P., & Kumar, E. V. M. (2019). State of whistleblowing research: A thematic analysis. FIIB Business Review, 9(2), 133–148. https://doi.org/10.1177/2319714519888314

Menaga, A., Selvakumar, L., & Shanmugam, V. (2023). Corporate social responsibility initiatives during COVID-19: A study on the Indian FMCG sector. IMIB Journal of Innovation and Management, 1–14. 10.1177/ijim.221148837.

Modi, N. (2018 February 17). PNB fraud case: Everything we know so far. Bloomberg Quint. https://www.bloombergquint.com/law-and-policy/the-nirav-modi-pnb-fraud-case-everything-we-know-so-far#gs.zLPWU0fa

Narayan, S. (2018). The Punjab National Bank Fraud in India: Failure of institutional controls and oversights [ISAS Brief No. 558]. https://www.isas.nus.edu.sg/wp-content/uploads/2018/03/ISAS-Briefs-No.-558-The-Punjab-National-Bank-Fraud-in-India1.pdf

Petkovski, M., & Kjosevski, J. (2014). Does banking sector development promote economic growth? An empirical analysis for selected countries in Central and Southeastern Europe. Economic Research-Ekonomska Istraživanja, 27(1), 55–66. https://doi.org/10.1080/1331677x.2014.947107

Pradhan, K., & Kumar, V. (2022). An empirical analysis of impact of banking sector on Indian stock market. Journal of Economic and Administrative Sciences. https://doi.org/10.1108/jeas-05-2022-0125

Rajan, R. G., & Zingales, L. (1998). Financial dependence and growth, American Economic Review. American Economic Association, 88(3), 559–586.

Rao, S. K. (2018). PNB fraud: How do bank manage operational risk? Economic & Political Weekly, 53(10). https://www.epw.in/engage/article/pnb-fraud-how-do-banks-manage-operational-risk

Sahay, R., Cihak, M., N’Diaye, P., & Barajas, A. (2015). Rethinking financial deepening: Stability and growth in emerging markets. Revista de Economia Institucional, 17, 73–107. https://doi.org/10.18601/01245996.v17n33.04.

Zaman, R., & Arslan, M. (2014). Corporate governance and firm performance: The role of transparency & disclosure in banking sector of Pakistan. International Letters of Social and Humanistic Sciences, 2, 152–166. https://doi.org/10.2139/ssrn.2524475.