PMC Bank Debacle: A Failed Corporate Governance Case

For sustained business growth, it is imperative to be proactive rather than reactive to issues of public interest. Had the new banking regulation amendments been introduced earlier, could they have prevented the Punjab and Maharashtra Cooperative (PMC) Bank debacle? The bank being put under the limits of the Reserve Bank of India (RBI) for six months was the dreaded headline on 23 September 2019. This was later revealed to be one of the country’s worst financial scams. PMC Bank, a top 10 cooperative bank, was interdicted by the RBI for under-reporting the loan sum sanctioned to HDIL (Housing Development and Infrastructure Limited) and misreporting non-performing assets (NPA) in their annual report. As an immediate consequence, all core activities of the bank came to a halt. Customers who had put their life savings in the bank never imagined that it would result in the deaths of up to eleven people and the devastation of hundreds of homes. It raises an important question about the governance standards upheld by a financial institution such as PMC Bank. Are the recent amendments to the Banking Regulation Act (2020) adequate to strengthen the regulations and corporate governance practices? Furthermore, will these amendments instil trust in a new depositor already perplexed by such news?