On this Punjab National Bank scandal, it does seem simple enough to understand what happened. But, that is worrying. If it was reasonably simple, why did it go undetected? It is not unreasonable to assume that several could be on the take – cutting across banks, auditors, the regulator, governments, etc. We live in a cynical world.
But, that is low probability because it is risky to involve too many stakeholders. Someone could spill the beans, if not out of altruism and morality but out of pique, let us say, because the spoils were not shared ‘fairly’. Yes, there could be moral considerations in immorality!
A scarier thought – scarier than the possibility of multiple layers and cross-sections of involvement – is that simply no one bothered to notice or do their job. The mind-numbing possibility is one of pervasive and deeply ingrained indifference and sloppiness. In other words, no one cared or cares any more!
Hence, it was scary to read that someone actually mentioned this as the possible reason for the scandal remaining undetected:
The accounts given by current and former executives who spoke to Reuters suggest an answer as simple as it is alarming: no one was paying attention. [Link]
This does not augur well for the integrity and unity of the country at all because it could be pervasive – yes, not within the banking system alone. Why should other sectors be different?
[Postscript: If the bank issued LoU to foreign banks (or, foreign branches of Indian banks, I presume that they would credit PNB’s Nostro account held with them before PNB credits the account of the borrower with the money. If I am right, why did the audit of PNB’s Nostro Accounts not spot the ‘unusual’ transactions? Why did anyone not raise a flag? Are these stupid questions? Perhaps.]