A Report Presented to the Faculty of

Graduate School of

P hilippine Christian U niversity

Graduate School of Business & Management
Master in Business Management

HUMAN BEHAVIOR IN ORGANIZATION (HBO)

A Case Study on
The Rise and Fall of Punjab Maharashtra Cooperative (PMC) Bank

by:
DARLEN MAY L. AMBE
JOSEPH S. CASTILLEJO
JO ANNE V. GUEVARRA
WILSON T. MADAMBA
MIRIAM LUNINGNING C. PADILLA
DBP Head Office

April 2020

Professor: NATHANAEL PERONA, Ph.D.

BACKGROUND

Punjab Maharashtra Cooperative Bank is a Scheduled Commercial bank with its area of

operation situated in six (6) states of the country: State of Maharashtra, Gujarat, Delhi Goa,

Karnataka, Madhya Pradesh and Andhra Pradesh. This bank was established on 13 February

1984 as a single branch Bank. It operated nicely and within a time of 35 years, the Bank has a

wide network of 137 branches across six states. PMC has 1814 number of employees.

The bank has several firsts to its credit including 12 hours uninterrupted service (8 am to

8 pm), 360 days banking (Sunday and Holiday banking), tele-banking service and women

empowerment (70% women employees).

The PMC bank operates with a goal of becoming the most preferred premier co-operative

bank in India, and is delivering increased customer excellence through its services to make that

happen.

At the time of its establishment PMC was a cooperative bank but in 2000 it got the status

of Schedule Commercial Bank by the Reserve Bank of India. PMC is the youngest bank to

achieve the ‘Scheduled Bank’ status.

The core of this bank fraud is that the higher management of the PMC bank has given

huge loan to the Housing Development and Infrastructure Ltd (HDIL) and its group entities. This

fraud case is related to transfer of 70% of the total credit facilities of the PMC bank to HDIL and

its associated companies. 

The PMC bank allegedly favored to the promoters of Housing Development and

Infrastructure Ltd (HDIL) and allowed them to operate password protected ‘masked accounts’.

It is found that around 21,049 bank accounts were opened by bogus names to conceal 44

loan accounts. The bank's software was also tampered to conceal these loan accounts.
 This bank fraud case is busted by a bunch of women employees of the credit department

of the PMC bank. These employees told to the RBI that they were aware of the ghost accounts.

When this case came in the light; then customers of the PMC bank rushed to the PMC bank to

withdraw their hard earned money but they were refused to give their deposited money and

withdrawal limit is set by the bank.

Now the Enforcement Directorate (ED) has sealed the assets of Rs 3,500 cr of the HDIL

group and the HDIL chief Rakesh Wadhawan and his son Sarang Wadhawan have been arrested

by the Mumbai Police.

I. TIME CONTEXT

During the early 1990’s to present

II. VIEW POINT

Reserve Bank of India (RBI)

III. CENTRAL PROBLEM

These things happened because PMC Bank was not following RBI guidelines and was

also doing unethical activities which were not known by the directors of the company. The

Chairman of the company Waryam Singh was also director of the Housing Development and

Infrastructure Ltd (HDIL). The huge loan of 2500 crore was sanctioned by him. HDIL a Real

estate company got under Bankruptcy. The Bank neither informed RBI about sanctioning loan

which was much more than RBI guidelines nor about the default made by HDIL.

Today, this bank is facing crisis due to various reasons. People are not able to take out

even their own money from the Bank.

IV. OBJECTIVES
 a. Must Objective

 To streamline establishment of bank licensing and/or operation;

 To institutionalize governing measures not only to comply with the regulators,

relevant laws, regulations, and international standards but also to prevent its

adverse effects to the entire banking industry, the entire nation and the global

economy; and

 To develop disciplinary action in accordance with the bank regulator’s policy

on administrative cases/sanctions

b. Want objective

 To develop and promote policies to combat money laundering;

 To be able to provide strict policies to prevent such banking frauds;

 To control the quality of the products and services being offered by the banks

V. AREAS OF CONSIDERATION

a. Strength

 PMC is the youngest bank to achieve the ‘Scheduled Bank’ status

 PMC is delivering increased customer excellence through its services

 PMC has several firsts to its credit including 12 hours uninterrupted service (8

am to 8 pm), 360 days banking (Sunday and Holiday banking), tele-banking

service and women empowerment (70% women employees).

b. Weaknesses

 Non-compliance to RBI rules and regulations

 Unlawful/Fraudulent activities
  Poor management

c. Opportunities

 All the bank’s Board of Directors (BODs) and Senior Management shall

attend to various training and development programs conducted by RBI and

Cooperative training institutes on various areas of banking

 To develop a system in compliance with prevailing laws on data privacy, data

protection and security in maintaining the database and in retrieving its data.

d. Threats

 People avoid conducting business/depositing their hard earned money to

Cooperative Banks; and

 The situation of the bank may lead to complete closure

VI. ALTERNATIVE COURSES OF ACTION

ACA #1: Develop/innovate a better banking system and corporate governance

 Advantage

1. Board of directors and senior management follow the code of ethics

adopted by bank

2. Annual reports contents, and disclosures give a true and fair picture of

working of the bank to their shareholders, depositors

3. May decrease losses

4. May increase revenues

 Disadvantage

1. Limiting innovation for product improvement

2. Will increase the IT research and development cost of the bank

ACA #2: Better supervision by RBI

 Advantage

1. Regulatory measures for the improvements in both for strengthening

the sector

2. It vests power in the RBI to give directions to banks and can take

action, to prevent the affairs of any banking company being conducted

in a manner detrimental to the interests of the depositors or in a

manner prejudicial to the interests of the banking company

3. Can also impose restrictions on banks to ensure better governance and

control

 Disadvantage

1. May increase the IT research and development cost of the regulator

2. May require additional employees

ACA #3: Greater financial literacy among people about cooperative

 Advantage

1. Cooperative banks are a way of distribution and a tool for reaching out

to customers in rural and semirural areas

 Disadvantage

1. Dual control– This leads to lesser supervision by RBI like on other

banks.

2. Lot of political influence– as it is also regulated by state

governments.
 3. Cooperative bank is governed by both banking and cooperative

legislation, as they are registered under the Cooperative Society Act,

1965

VII. RECOMMENDATION

The group recommend the ACA#1. In order for the Punjab Maharashtra Cooperative

(PMC) Bank to keep abreast with the leaders in this kind of market, there is a need for the

Bank’s BODs and Senior Officers to attend various relevant trainings and workshops.

To achieve PMC’s goal to be able to return the people’s trust in the bank, the company

must develop or cause for innovation of new bank’s operating system. The bank should also

develop a powerful contact center solution to meet its demand for customer support and lead

generation customer experience. This will attract more customers, specifically the millennials.

This will eventually increase deposits and revenues; thus, decreases losses. Although this may

increase the company’s research and development cost.

VIII. PLAN OF ACTION

a. The company’s Board of Directors (BOD) shall approve the innovation and

development of the new bank’s operating system.

b. The CEO shall prepare plan of action including:

 Compliance to regulators

1. Start updating the Bank’s Operating Manual and Policies

2. Examine the process and ensure that treats and risk control are in place

 Mission, vision and values

1. Hire the best programmer/employee

2. Review the bank’s policies and regulations

 3. Submit the plan of action to the BOD

4. Implement the plan

 Workforce Profile

1. Conduct a research of what are the common issues/concerns of the

clients

c. Restrict the political intervention in the functioning of the Indian banks.

d. Ultimately stake holders and depositors are the best judge to comment on the working

of the bank as read and understood by them the report of the bank.