business failure case study india

This free sheet contains 100 accelerators and incubators you can apply to today, along with information about the industries they generally invest in.

This free sheet contains all the information about the top 100 unicorns, including their valuation, HQ's location, founded year, name of founders, funding amount and number of employees.

This free Notion document contains the best 100+ resources you need for building a successful startup, divided in 4 categories: Fundraising, People, Product, and Growth.

17 Failed Indian Startups & Analyses on Why they Failed

Description

Countless startups are being launched every day in India.

Many fail because they did not learn from the success of other companies who've managed to rise above.

We just published this list of 17 failed startups from India with analyses on why they shut down, and interviews with their founders.

17 Failed Startups Founded in India

Everything you need to raise funding for your startup, including 3,500+ investors, 7 tools, 18 templates and 3 learning resources.

Information about the industries, countries, and cities they generally invest in.

Information about their valuation, HQ's location, founded year, name of founders, funding amount and number of employees.

List of startup investors in the FinTech industry, along with their Twitter, LinkedIn, and email addresses.

List of startup investors in the BioTech, Health, and Medicine industries, along with their Twitter, LinkedIn, and email addresses.

List of 250 startup investors in the AI and Machine Learning industries, along with their Twitter, LinkedIn, and email addresses.

90% of startups fail. Learn how to not to with our weekly guides and stories. Join 40,000+ founders.

Dazo was a food-tech startup based in Bangalore which emerged as a “food on demand” company. Fierce competition and lack of funding led to Dazo's failure.

Details of the startup:

Monica Rastogi, Shashaank Shekhar Singhal

Food & Beverage

Started in:

Nº of employees:

Funding Amount:

Specific cause of failure:

Competition

You can read more about their failure here .

Frankly.me was a Q&A social platform that wasn’t able to raise the necessary round of funding. That is why the CEO of Frankly decided to shut it down.

Abhishek Gupta, Nikunj Jain

Social Media

Lack of PMF

HotelsAroundYou

HotelsAroundYou was an India service centered on last-minute and short stay bookings. They weren't capable of raising more money and had to shut down.

Animesh Chaudhary, Harsha Nallur, Mohsin Dingankar

Koinex was a cryptocurrency exchange platform. India's laws got harsh against cryptocurrencies and the obstacles and little profits led to its shut down.

Aditya Naik, Rahul Raj, Rakesh Yadav

Legal Challenges

Lumos provided the ultimate smart switching tech. After the shutdown, the founders recognized they were not the right team to build a hardware company.

Pritesh Sankhe, Tarkeshwar Singh, Yash Kotak

Software & Hardware

Lack of Experience

PepperTap provided a platform to buy and deliver groceries from local markets. Customers found delivery fees too expensive for their needs, and shut down.

Milind Sharma, Navneet Singh

1,000-5,000

Poor Product

RoomsTonite

RoomsTonite was a last-minute hotel booking app for people traveling to India. They raised $1.5M in funding but the money didn't arrive and they shut down.

Suresh John

Lack of Funds

SchoolGennie

SchoolGennie provided solutions that saved time, reduced costs, and helped make better decisions on schools. But they didn’t test their product-market fit.

Amit Gupta, Pardeep Goyal

Stayzilla, once a thriving homestay network with $33.5M in funding, closed due to unsustainable operational costs and consistent financial losses.

Rupal Yogendra, Sachit Singhi, Sachit Singhi, Yogendra Vasupal

Lack of Focus

Zoomo's goal was to build trust in the Indian used cars market. The buy-and-sell vehicle market was relatively young in India and decided to shut down.

Arnav Kumar, Himangshu Hazarika

Transportation

Bad Business Model

Adleaf Technologies

Back in 2013, Chetan Vashistth founded his first startup business called “Adleaf Technologies”, a blend of programming bootcamps and software solutions. Business was good for a while, but the challenge of multiple bad business decisions paired with failed money management proved to be the business’s demise. In this interview, we will talk about the lessons Chetan learned the hard way.

Chetan Vashistth

Mismanagement of Funds

Autto.in was an on-demand doorstep car service provider, created by Deepak in 2017. Soon after launching, a co-founder joined him and they started marketing the startup, spending a lot of money in customer acquisition. As money burnt, they decided to reach investors, who put them pressure in growing fast. After some months, they decided to shut down.

Deepak Murthy

FreshConnect

Tarun co-founded Freshconnect, an online B2B marketplace for fresh agricultural produce like fruits & vegetables. After making mistakes like lack of focus and bad hiring, they couldn't secure a funding round and eventually got acqui-hired by another company.

Tarun Gupta

Bad Management

InoVVorX was an app development company that both worked for clients and built their own projects. The business did it well for some time, having a team of 25 people, making $300k from their services, and raising $100k. However, their plans on working on their own products (too many of them) meant they started burning all the money and eventually had to shut down.

Maxim Dsouza

$100K-$500K

Jasmeet is an Indian software engineer who a few years ago decided to build new revenue strategies for his business directory and decided to build a job board with a unique offline-online model. But their idea was too ahead to the time and, due to a bad business model, they had to shut down.

Jasmeet Singh

Mishra Motors

Mishra Motors was to be the premier electric sports bike in India. Time and capital were the causes of its collapse.

Naveen Mishra

The Punjab Kitchen

Amit is a hard-core sales professional, who decided to set up a home-made food business with his wife. They started investing $1,200/month to set up the startup and get the first customers. However, once running they had to confront a big problem: the prices of their competitors were much lower. After some pivots, they decided to shut it down.

90% of startups fail. Learn how not to with our weekly guides and stories. Join +40,000 other startup founders!

An all-in-one newsletter for startup founders, ruled by one philosophy: there's more to learn from failures than from successes.

100+ resources you need for building a successful startup, divided into 4 categories: Fundraising, People, Product, and Growth.

To read this content please select one of the options below:

Please note you do not have access to teaching notes, why do indian startups fail a narrative analysis of key business stakeholders.

Indian Growth and Development Review

ISSN : 1753-8254

Article publication date: 20 April 2023

Issue publication date: 24 July 2023

This paper aims to examine the factors that lead to the failure of startups in India and proposes a ‘Four Dimensional (4D) Strategic Framework’ to drive success.

Design/methodology/approach

This study is exploratory and uses a narrative analysis methodology to analyse the accounts of key startup stakeholders – founders, investors, former employees and consumers; to identify their failure factors. A conveniently selected sample of 165 startups was studied to understand better the reasons for their failure within a thematic framework developed from David Feinleib’s (2012) handbook “Why Startups Fail”.

Results indicate that a dearth of capital or running out of money and inadequate sales and marketing strategy, which leads businesses to fall behind rivals and lose money on each transaction, are the most common factors for startup failure in India.

Originality/value

“Startups” are substantial for emerging economies like India because they fuel technological innovation and economic progress and provide for the modern workforce’s needs and aspirations. However, they seem to be typically unprofitable, with a modest probability of survival. Subsisting studies mainly focus primarily on success factors and very few on why startups fail, with significant disagreement on an appropriate methodology. To the best of the authors’ knowledge, this is the first study that analyses failure factors of Indian startups using narrative analysis of its key stakeholders. It aims to aid the conception of profitable entrepreneurship by reducing the failure frequency in the startup and small business ecology.

• Entrepreneurship
• Failure factors
• Narrative analysis
• Thematic framework
• Success strategy

Goswami, N. , Murti, A.B. and Dwivedi, R. (2023), "Why do Indian startups fail? A narrative analysis of key business stakeholders", Indian Growth and Development Review , Vol. 16 No. 2, pp. 141-157. https://doi.org/10.1108/IGDR-11-2022-0136

Emerald Publishing Limited

Copyright © 2023, Emerald Publishing Limited

Related articles

We’re listening — tell us what you think, something didn’t work….

Report bugs here

All feedback is valuable

Please share your general feedback

Join us on our journey

Platform update page.

Visit emeraldpublishing.com/platformupdate to discover the latest news and updates

Questions & More Information

Answers to the most commonly asked questions here

• Take One: Big story of the day

First General Motors, Citibank and now Disney; why do MNCs fail in India?

Exit from the india market by multinationals is often on account of problems in home territory or failure to segment the indian market correctly.

• Most Popular

After studying law I vectored towards journalism by accident and it's the only job I've done since. It's a job that has taken me on a private jet to Jaisalmer - where I wrote India's first feature on fractional ownership of business jets - to the badlands of west UP where India's sugar economy is inextricably now tied to politics. I'm a big fan of new business models and crafty entrepreneurs. Fortunately for me, there are plenty of those in Asia at the moment.

• PI Industries: Focusing on small details to win big
• SBFC Finance: Enabling lending to small businesses
• Explained: Why are gold prices rising?
• DLF, MKJ Enterprises feature prominently in electoral bond list
• With MG, JSW wants to create a "Maruti moment for electric vehicles"
• Podcast: Unilever's Bargain Offer
• Rupa Garments: The Inside Story
• Economic Milestone: Nationalisation of Banks (1969)
• Vini Cosmetics: Smelling good
• Having a CMO in the management makes a huge difference: Hyatt's chief marketing officer
• " class="general-icons icon-sq-whatsapp">
• " class="general-icons icon-sq-googleplus popup">

Related stories

Disney+ Hotstar loses 12.5 million paid subscribers in the quarter ended June

Ford Motors tries to reinvent itself to catch up to Tesla and Elon Musk

How bias towards home-country culture holds back multinationals' growth

• " class="general-icons icon-sq-youtube">

Uncharted Waters: In photos this week

Inside the 2024 elections: Policy complacency risk or is it too optimistic?

Is cost becoming an increasingly determining factor in quitting smoking?

In the world's first Venice to trial day tickets

Why younger workers just can't get ahead

New regulations get European banks interested in crypto services

Clean Power: At 7 GW, India installs highest renewable energy sources in March

Orry's marketing playbook: How a Rs 2500 T-shirt became the hottest party pass

Photo of the day: Taking to the skies

Brand Breakthroughs: Can gen AI make all marketers creative?

It's time to stop hiring for 'fit': Poornima Luthra

'Mrs Jhunjhunwala' to 'Rekha Jhunjhunwala': How the new custodian of wealth is finding her feet

PayPal proposes crypto incentives for eco-friendly Bitcoin mining

Want to be more productive at work? Aim for a state of creative 'flow'

World's top 5 thrilling travel experiences to explore

• SUGGESTED TOPICS
• The Magazine
• Newsletters
• Managing Yourself
• Managing Teams
• Work-life Balance
• The Big Idea
• Data & Visuals
• Reading Lists
• Case Selections
• HBR Learning
• Topic Feeds
• Account Settings
• Email Preferences

Business failures

• Finance and investing
• Corporate finance
• Financial analysis

Kodak's Downfall Wasn't About Technology

• Scott D. Anthony
• Scott Anthony
• July 15, 2016

The Scary Truth About Corporate Survival

• Harvard Business Review
• From the December 2016 Issue

Today's Innovation Can Rise from Yesterday's Failure

• Vijay Govindarajan
• March 29, 2011

Finding Your Company's Second Act

• Larry Downes
• From the January–February 2018 Issue

Why Do So Many Strategies Fail?

• David J. Collis
• From the July–August 2021 Issue

Redefining Failure

• From the September 2010 Issue

Can Zombie Firms Survive Rising Interest Rates?

• Walter Frick
• September 02, 2022

Set Up to Fail: Economist Paul Ormerod on Strategy and Extinction

• Paul Ormerod
• Gardiner Morse
• From the June 2007 Issue

Selection Bias and the Perils of Benchmarking

• Jerker Denrell
• From the April 2005 Issue

Why Start-ups Fail

• Tom Eisenmann
• From the May–June 2021 Issue

Maybe Failure Isn't the Best Teacher

• Lauren Eskreis-Winkler
• Eben Harrell
• From the May–June 2020 Issue

A Tale of Two Business Models

• Harvard Business Publishing
• August 01, 2022

Why CRM Projects Fail and How to Make Them More Successful

• Scott Edinger
• Scott Edinger 
• December 20, 2018

The Case for Investing in Underdogs

• Chengwei Liu
• David Maslach
• July 18, 2022

What Drives You Nuts about Failure?

• April 18, 2011

Strategies for Learning from Failure

• Amy C. Edmondson
• From the April 2011 Issue

Here's Why Strategy Chiefs Succeed or Fail

• Jo Whitehead
• Felix Barber
• Rebecca Homkes
• January 19, 2018

How Businesses Have Successfully Pivoted During the Pandemic

• Mauro F Guillén
• July 07, 2020

Why Hard-Nosed Executives Should Care About Management Theory

• Clayton M. Christensen
• Michael E. Raynor
• September 01, 2003

How to Overcome Your Fear of Failure

• Susan Peppercorn
• December 10, 2018

Cooptex: Reinventing Itself

• Tulsi Jayakumar
• June 13, 2017

Ça Va de Soi: A Phoenix Rises from the Ashes of a Failed IT Project - Part B - The Rise

• Simon Bourdeau
• Dragos Vieru
• Amelie Bernier
• September 01, 2016

Schlitterbahn: Tragedy at the Waterpark

• Jonathan Landis
• Kanina Blanchard
• July 14, 2022

Studio Realty

• December 05, 1996

Unleashing Human Magic at Best Buy

• Leonard A. Schlesinger
• Sunil Gupta
• Amram Migdal
• April 08, 2024

Purity Steel Corporation, 2012

• Robert Simons
• Antonio Davila
• March 04, 1997

Lehman Brothers: Too Big to Fail?, Epilogue

• Jack Lysohir
• Emi Nakamura
• Pierre Yared
• September 19, 2016

Project Deutschland: Unpeeling the Onion of a Distressed Real Estate Portfolio

• Nori Gerardo Lietz
• Ricardo Andrade
• March 31, 2016

Quincy Apparel (B)

• Thomas R. Eisenmann
• Lisa Mazzanti
• February 11, 2015

Aikon Medical Devices Co. (A): Strategizing for continuous success

• Frederic Dalsace
• Mala Banerjee
• March 27, 2022

Baroo (A): Pet Concierge

• Susie L. Ma
• August 27, 2019

Deloitte & Touche (A): A Hole in the Pipeline

• Rosabeth Moss Kanter
• Jane Roessner
• September 28, 1999

Wild Oats Markets, Inc.

• Travis Haglock
• John R. Wells
• September 05, 2006

GoPro: The Disruptive Innovator Faces Challenges

• Rishi Dwesar
• Geeta Singh
• July 30, 2018

Successes and Failures of Amazon's Growth Strategies: Causes and Consequences

• W. Chan Kim
• Renee Mauborgne
• Oh Young Koo
• September 25, 2017

Ransomware Attack at Springhill Medical Center

• Suraj Srinivasan
• February 17, 2023

Classtivity: Payal's Pirouette

• Jeffrey J. Bussgang
• Olivia Hull
• January 10, 2017

European Integration: Meeting the Competitiveness Challenge

• Michael E. Porter
• Christian H.M. Ketels
• July 25, 2013

Breaking Bad (the Rules): Argentina Defaults, Inflates (and Grows), 1997-2015

• Rafael Di Tella
• Fernanda Miguel
• December 04, 2013

"Care in Every Drop": Ayala Corporation and Manila Water (B)

• Debora L. Spar
• Paul M. Healy
• Tricia Peralta
• Julia Comeau
• November 27, 2023

Schlitterbahn: Tragedy at the Waterpark, Teaching Note

Ça va de soi: a phoenix rises from the ashes of a failed it project, teaching note, lehman brothers: too big to fail, teaching note.

• December 11, 2018

The Cognitive Shortcut That Clouds Decision-Making

• Jonas De keersmaecker
• Katharina Schmid
• Nadia Brashier
• August 16, 2022

Popular Topics

Partner center.

Tata Nano's Failure To Attract Customers [Tata Nano Case Study]

Devashish Shrivastava

Tata Nano is a compact vehicle that was produced and showcased by Indian automaker Tata Motors , principally in India, as a modest back-engined hatchback expected to speak to current riders of bikes and bikes — with a dispatch cost of Rs 1,00,000  or $2500. Delays during the production line migration from Singur to Sanand, early cases of the Nano bursting into flames, the impression of the vehicle being perilous, and compromise in quality due to cost slicing are some of factors behind Tata's failure to attract Indians.

Here we present the case study of tata motors – nano case and find out why did Tata Nano Failed and never gained traction despite being termed as the 'people's car'.

Tata Motors anticipated creation of 250,000 every year at dispatch. This didn't happen. Only 7591 were sold for the model year 2016-17. In 2017, Tata Motors said assembling would proceed because of Tata's passionate promise to the project. In 2018, Cyrus Mistry, previous Chairman of the Tata Group, called the Tata Nano a venture in progress with China, with a generation overhaul scheduled in May 2018.

Tata Motors' Nano Initiative Initial Effects Of Tata Nano Marketing And Business Strategy Of Tata Nano Why Tata Nano Failed? Tata Nano's Attempted Comeback FAQs

Tata Motors' Nano Initiative

After effectively propelling the ease of Tata Ace truck in 2005, Tata Motors started the advancement of a reasonable vehicle that would speak to the numerous Indians who ride motorcycles . The price tag of this nitty-gritty auto was brought somewhere around getting rid of the most superfluous highlights, diminishing the measure of steel utilized in its development, and depending on ease of Indian labor.

The superfluous highlights include the evacuation of the traveller's side wing mirror, having one wiper sharp edge, having just three fasteners for every wheel, and the expulsion of the fuel filler top from the fuel tank. The presentation of the Nano got much media consideration because of its low cost of Rs. 100,000. The vehicle was promoted as "The People's Car".

Initial Effects Of Tata Nano

A report by the Indian rating office CRISIL figured the Nano would extend the country's vehicle advertising by 65%, in any case, starting late 2012. However, deals in the initial two monetary years after the vehicle's divulging stayed unfaltering at around 70,000 units. Tata still proposed the ability ability to deliver the vehicle in a lot bigger amounts, somewhere in the range of 250,000 every year, if the need arise.

It was foreseen that its 2009 presentation would significantly influence the trade-in vehicle market, and costs dropped 25–30% before the launch. Sales of the Nano's closest rival, the Maruti 800, fell by 20% promptly following the disclosing of the Nano.

It is obscure if the Nano has lastingly affected the costs of and interests for close substitutes. In July 2012, Tata's Group administrator- Ratan Tata , who resigned in January 2014, said that the vehicle had huge potential while conceding that the early open doors were squandered because of starting problems. Due to the business drops, just a solitary unit was delivered in June 2018.

Marketing And Business Strategy Of Tata Nano

India is an organization with a larger part of its populace dwelling as a low pay gathering. Purchasing a vehicle is still a fantasy for many families in India. In the year 2008, Ratan Tata reported the dispatch of its new vehicle, which would be a progressive item in the car division. He called it a 1 Lakh rupee vehicle and the same title was used for promotions .

The fantasy of a middle and even lower white collar class family unit to have their very own vehicle woke up with this declaration from Tata Motors. It was hailed to be cutting edge innovation and was commended by international media. An entirely unexpected story unfurled when the vehicle appeared on the streets.

India Customer's Needs

Ratan Tata's flash for the Nano came when he saw groups of 3-4 individuals utilizing a motorbike for transportation . There are a great many bicycles in India and it has constantly presented well-being worries for the general population. In blend with the poor street conditions in India and conveying a full family on a bike, bikers are subjected to numerous mishaps.

His strategical view drove the concept of a low cost vehicle and chose that the 1 Lakh Rupee sticker price will be appealing to the objective market.

Proclamation

At the point when Tato Nano was declared in the long stretch of January 2008, it was over-advertised to be the vehicle of each Indian. The cost of Nano was pegged at Rs. 1 lakh or $2500 by Ratan Tata, the Chairman of the Tata Group by then of time.

It turned into a fantasy vehicle for each individual having a place with the lower working class and even the lower class. Anyway, the service of the vehicle additionally raised worries about the blockage on streets that the vehicle would acquire as individuals began to utilize it for everyday transportation.

Strategic Plans

TATA Motors fundamentally segmented and focused on the following sections of the Indian population:

• The middle class- Fundamentally the lower white-collar class.
• Upper lower class- Normally the bike clients .
• Family with 3-4 individuals who have inconveniences while going on a 2-wheeler.

Affordability And Family Friendly Usage

Tata Nano being propelled in the Indian market was an opportunity for the normal man of India to fulfill his dream of owning a vehicle. The promotions and media productions featured the passionate remainder that demonstrated the joy of youngsters when they see a vehicle coming to their home, and the joy on the substance of the relatives who delineated a white-collar class gathering.

The battling Indian classes who had a month to month pay of under Rs.6000 every month and comprised more than 110 million families got the chance to dream of purchasing a vehicle. Mr. Ramesh Mangaleswaran, an accomplice of McKinsey and co., anticipated that in Mumbai alone the 2 million individuals who rode a cruiser ordinary would now attempt to lift themselves to purchase a Tata Nano.

It was expected that Tata Nano would make a progressive change in the way of life, uncommonly concerning the substitution of the regular man. It would turn into a face of the Indian lower class, just like the Bajaj Scooter at one time represented the white-collar class.

Why Tata Nano Failed?

Ratan Tata stayed faithful to his obligation and the Indian market saw Nano set on the streets in the long stretch of July 2009. At the start, the deals for the vehicle were high. It then began to decay on every month. There are a few reasons of failure which justify Tata Nano's downfall,

• Failure in marketing the vehicle was the main reason behind Tata Nano's Failure to attract customers .
• TATA nano promotes itself as the least expensive vehicle.
• No one needs to drive the least expensive vehicle.
• Purchasing a vehicle is identified with economic well-being and distinction in the public arena.
• "Cheap" and "lakhtakia" used in Tata Nano's advertising for advancement and showcasing all over India disturbed its image.
• The engine was an issue.
• There was a buzz in the universal media, "What if Nano becomes successful? It would mean an end to the second-hand car market ."

Problems With The Car

• Awful picture of the shoddy vehicle.
• Several cars caught fire. Thus, in spite of its low cost, people refrained from buying it .
• Media channels covering the news related to Tata Nano underestimated the vehicle. In any case, they were correct.
• The car was not fit for sloping territories.
• The motor used to make a great deal of clamor, and individuals even compared it with an auto.
• Insides were dull with inadequate leg space.
• The whole assemblage of Nano was light and prone to damage on even the slightest of knocks.

Other Reasons

• Tata Nano got around 200,000 appointments at first. This made Tata Motors complacent and it didn't bother about new advertising strategies . New publicity procedures were essential to keep the enthusiasm of the individuals unblemished. But it wasn't done. When the main flame episode was accounted for, the ad system then just looked responsive and upgraded rather then focusing on negative attention.
• Nano was viewed as an attraction for individuals who never thought of purchasing a vehicle. It was focused on engine cycle riders, recycled vehicle proprietors, and different families in the lower white collar class gathering. This prompted some degree of opposition. According to the intended interest group, the media and the general public acknowledged Tata Nano as a poor man's vehicle.
• Ratan Tata in his previous question and answer sessions referenced that he wanted to position Tata Nano as a 'reasonable, all climate family vehicle".
• At the point when Nano later raised its cost to conquer the negatives of the principal model, the cost turned out to be a lot higher. The top-end Model of Tata Nano (2014) was cited at an on-street cost of around Rs.2.6 lakhs in Bangalore . This sort of evaluation with the equivalent Nano model which the poor man likewise claimed, confounded the clients..

Tata Nano's Attempted Comeback

In the year 2013 Tata engines re-propelled Tata Nano with new components and publicity efforts. The re-dispatch concentrated on the following:

Focusing on the young people of the nation, the new Nano had extravagant settings like settings and shading blends, for example, ranch side or experience sports . The ads and crusades this time concentrated on the adroitness factor. The emphasis was, "Why not purchase a Nano when it gives everything at a deep discounted?" It additionally featured the rational advantage of Fuel productivity in another manner.

This time, Tata Nano pursued another sort of crusade altogether. They began to support programs on MTV that energized experience sports and stretched out the crusade on National TV.

Like the arrangement Roadies circulated on MTV where the members need to go on a Hero Karizma, they attempted to execute a comparable technique where the members were approached to traverse India in a Tata Nano. This validated the intense with which the vehicle was fabricated.

It concentrated on the passionate parts of a parent, and the car was promoted such that guardians can give their children a Tata Nano as opposed to giving them bicycles; a vehicle is more secure than a bicycle. This would likewise make them brilliant guardians.

Why did Tata Nano failed?

There are a few reasons of failure which justify Tata Nano's downfall,

• Failure in marketing the vehicle was the main reason behind Tata Nano Failure to attract customers.
• Tata Nano promotes itself as the least expensive vehicle.
• There was a buzz in the universal media, "What if Nano becomes successful? It would mean an end to the second-hand car market."

Why did Tata Nano fail to attract customers?

Delays during the production line migration from Singur to Sanand, early cases of the Nano bursting into flames, the impression of the vehicle being perilous, and compromise in quality due to cost slicing are some of factors behind Tata's failure to attract Indians. Also Tata nano promotes itself as the least expensive vehicle. No one needs to drive the least expensive vehicle.

Is Tata Nano still available?

Tata Nano is no longer available in the new car market.

Is Nano car still in production?

No Tata Nano is no longer manufactured.

What went wrong with Tata Nano?

Tata Nano got around 200,000 appointments at first. This made Tata Motors complacent and it didn't bother about new advertising strategies. New publicity procedures were essential to keep the enthusiasm of the individuals unblemished. But it wasn't done. When the main flame episode was accounted for, the ad system then just looked responsive and upgraded rather then focusing on negative attention.

Must have tools for startups - Recommended by StartupTalky

• Convert Visitors into Leads- SeizeLead
• Payment Gateway- Razorpay
• Spy on your Competitors- Adspyder
• Manage your business smoothly- Google Workspace

Behind the Genius: Exploring the Life of Alakh Pandey, the Physics Wallah

“Our aim is to bring about a revolution in education by reaching out to millions of students in a sustainable and affordable way,” says Alakh Pandey, the CEO of “Physics Wallah”. Here is yet another inspiring story of a man whose journey from poverty to prosperity is nothing short of

Top AI Music Generator Tools Making Waves: List of AI-Music Generators

The entire world has been apoplectic over artificial intelligence ever since it was first proposed. Several companies have already begun using AI to replace humans in their specific operations. When it comes to music, AI is essentially a sheet anchor. The module's training on massive datasets allows it to examine

Outlast Labz USA Launches in India, Offering Premium Fitness Supplements

New Delhi (India), April 17:  Outlast Labz USA has officially launched its operations in India, aiming to dominate the global market. The USA-born brand, founded in 2020, is set to redefine the nutritional supplement industry in India. At a time when health and wellness are paramount, Outlast Labz is expanding

Bridging Online and Offline: How Finndit Connects Digital Presence to Physical Stores

New Delhi (India), April 17: In today's digital age, the importance to include businesses on local search engines has never been more evident. Finndit stands out as a prime example, functioning not merely as a typical search engine but as a facilitator of community connections. This platform seamlessly integrates user-generated

Why Attend?

• Live Online
• 1,00,000+ people attended since 2009
• Rs 1999 FREE
• Certificate of Participation
• An exclusive Surprise

[Case Study]: Big Brand Failures; Lessons to Learn From

Table of Contents

A good marketing strategy is the most effective way to increase the brand awareness . But, when the marketing strategies go wrong and turn into a marketing failure then it can be the major reason behind the fall of your brand.

Maintaining the brand value and strategy is a challenging journey, even when you reach great heights. Always take the right decision as single marketing blunder can destroy your brand completely.

In this age of rapidly changing technology either you have to adapt the change with time or you fail. Those who refuse to improve become redundant and irrelevant to the industry one day.

This case study talks about how fairly large marketing mistakes of big brands leaded to their devastation. If we come to seek examples there are many, yet here we have picked up 3 known names, Kingfisher, Kodak and Nokia, whose stories are mere enough to let you know the failure reasons.

1) The Rise, Dominance and Fall of Kingfisher

About kingfisher.

In 2003, Kingfisher Airlines Limited was founded by Vijay Malllya as a premium and world-class airline group. The airline was based in Bangalore India and had more than 400 flights per day (Domestic & International). It used to be the most admired name in Asia-Pacific region.

The Rise of Kingfisher Airlines

On its peak time, it was the 2 nd largest airline, in terms of carrying the number of passengers. The quality and comfortable service attracted many passengers in the initial years. And, then the Kingfisher acquired Air Deccan in 2007.

In just 3 years after touching the skies, the first international Bengaluru-London flight in 2008 was launched.

Marketing Strategy

They promoted the brand through all media channels like Radio, Television, Print, Multiplexes, Malls and in their In-flight magazines too.

• In just 2 years, the airlines achieved the aviation market share of 10%.
• During 2007, they had the most aggressive expansion plans of all Indian carriers.
• In June 2007, their influence in the market was increased with the acquisition of 26% shareholding of Air Deccan Airlines.
• During February 2009, more than 900,000 passengers flew with Kingfisher giving it the highest marketing share in India.

How Brand turned into Non-Performing Asset?

• By the end of the March 2008, company was under the debt of INR 934 cr and net losses continued to widen in the following financial year.
• Acquisition of Air Deccan marked the end of Kingfisher Airlines. By the year 2009-10, airlines accumulated the debt of over INR 7,000 cr as the losses continued to pile up. 2010 was the year when it turned into a non-performing asset for banks.
• In 2012, the airlines operations were shut down as the DGCA suspended its flying license.

What Went Wrong?

• Lack of Delegation.
• Low-cost airline aviation airline, Air Deccan was treated as a step-child.
• Unnecessary Burning of Fuel.

The major reason that the brand was grounded was that it wasn’t just into one business and trying hands on more than one business. The founder was taking care of different businesses personally without appointing proper CEOs and couldn’t succeed in doing so. And, it’s pretty obvious that if two brands serve almost the same service, then people would rather prefer the cheaper one.

2) How Kodak couldn’t evolve with time and failed?

About kodak.

The American technology company, Kodak, was built on the culture of innovation and change in 1888. The company was invented and marketed by George Eastmen who was a former bank clerk from New York. At that time, it used to be a simple box camera, loaded with 100-exposure roll of film.

Kodak held a dominant position in photographic film in its time. Its tagline “ Kodak Moments ” was so famous that it was used for promoting events.

Marketing Strategy of Kodak

The real genius of founder Eastman lied in his marketing strategy. He launched an advertising campaign which featured children and women operating the camera with a slogan, “ You press the button, we do the rest .”

• In 1935, produced the first mass-market color film in 16 and 8mm.
• Kodak owned the film market with 90% market share in 1970s.
• Created the first digital camera in 1975.

How Kodak Failed?

The first digital camera was designed by a Kodak engineer, Steve Sasson in 1975. It was a filmless photography at that time so they didn’t want to threaten their film business so didn’t do the marketing of the Digital camera. Whereas, other digital companies like Sony, Nikon, Fujifilm took the full advantage of the situation.

Kodak missed the opportunities in the technology, they themselves invented.

• Kodak couldn’t get on the nerve of the modern technology and remained in denial for long about digital photography while all the other brands adapted the change by introducing electronic cameras.
• Even before the digital photography they were failing to keep up as its rivalry Fujifilm started doing a better job than them.
• In January 2012, the big name went bankrupt because of not making the smart move into the digital world fast enough.
• On February 9, 2012, Kodak announced that it will exit the digital image capture business.

The Kodak failed due its slowness in transition. The world moved ahead with digital cameras, SD cards and USB cables but the company remained stuck with films. They didn’t know how to respond in time and technology eventually killed the Kodak films.

3) How Nokia got acquired by Microsoft?

About nokia.

Nokia Corporation was founded in 1865 in Finland. The company was formally known as Nordic Mobile Telephone (NMT). The company name was changed to Nokia in 1871. They built the first international mobile phone in 1981 and this marked the beginning of the mobile era.

The Rise of Nokia, Connecting People

• Nokia phone was used in 1991 for making the first GSM call.
• In 1992, they launched Nokia 1101, the first GSM handset which became an instant hit.
• In 1988, Nokia became the world leader in mobile phones.
• Nokia’s Marketing share grew to 74% in March 2006 from 61.5%in October 2005.
• In the color phone category, market share jumped to 59.3% from 40.9%.

The Fall of Nokia

Nokia used to own a large portion of market of smartphone before the iPhone came out in market in 2007. Their refusal to change and learn new things lost their survival and this ultimately leaded to their demise.

It used to be the leader in its market whereas Samsung was nowhere to be seen. But, Samsung made the move at the right time and gained the success.

The pioneer brand failed to respond to the completely changed smartphones with full touchscreen and application based operating system. The years passed and they didn’t keep up with the expectation of people and the consumers shifted.

They remained their focus on the Symbian series. Until 2011, company didn’t make the leap of faith onto the Windows phone and due to their slow response they suffered such demise.

• Nokia got acquired by Microsoft in 2013.

And as we conclude, we look forward to the statement made by Stephen Elop, Nokia’s CEO in his speech when Nokia got acquired by Microsoft that “ we didn’t do anything wrong, but somehow, we lost ”. And, as far as the parameters on which success is measured, he was right somewhere that they didn’t do anything wrong, it’s just that they were unable to adapt the change at the right time and so, lost.

The unwillingness to embrace the needed marketing change when required was probably the main cause that turned these brands down. One needs to think and act holistically for growing the brand with time otherwise, if you don’t change, you will definitely get removed from the competition.

1 thought on “[Case Study]: Big Brand Failures; Lessons to Learn From”

I could not resist commenting. Well written!

Leave a Comment Cancel Reply

Your email address will not be published. Required fields are marked *

Save my name, email, and website in this browser for the next time I comment.

30 Social Bookmarking Sites to Boost SEO & Drive Traffic

8 Digital Marketing Tips Your Competitors Probably Don’t Know

13 CTA Stats to Quantify Its POWER for BRANDS

DSIM Reviews – See What DSIM’s Awesome Trainees Say about DSIM

[CASE STUDY]: How M.A.C Cosmetics became the world’s leading Makeup Company?

5 Google Penalty Checker tools To Save You

How Narendra Modi Leveraged Social Media to Generate Awareness about his Political Party

How penguin books india used fb to increase awareness and attendance for its flagship spring fever 2013 book festival.

CASE STUDY: How GrabOn started with 6 interns became India’s leading Couponic platform?

Advertisement

A crisis that changed the banking scenario in India: exploring the role of ethics in business

• Published: 28 August 2022
• Volume 11 , pages 7–32, ( 2022 )

Cite this article

• Sushma Nayak   ORCID: orcid.org/0000-0001-9645-3095 1 &
• Jyoti Chandiramani   ORCID: orcid.org/0000-0002-6766-8975 1  

4934 Accesses

3 Citations

1 Altmetric

Explore all metrics

Digital business has marked an era of transformation, but also an unprecedented growth of cyber threats. While digital explosion witnessed by the banking sector since the COVID-19 pandemic has been significant, the level and frequency of cybercrimes have gone up as well. Cybercrime officials attribute it to remote working—people using home computers or laptops with vulnerable online security than office systems; malicious actors relentlessly developing their tactics to find new ways to break into enterprise networks and grasping defence evasion; persons unemployed during the pandemic getting into hacking; cloud and data corruption; digital fatigue causing negligence; etc. This study adopts a case-based approach to explore the importance of business ethics, information sharing and transparency to build an information-driven society by scouting the case of Punjab and Maharashtra Co-operative (PMC) Bank, India. PMC defaulted on payments to its depositors and was placed under Reserve Bank of India’s directions due to financial irregularities and a massive fraud perpetrated by bank officials by orchestrating the bank’s IT systems. The crisis worsened when panic-stricken investors advanced their narrative through fake news peddled via social media channels, resulting in alarm that caused deaths of numerous depositors. It exposed several loopholes in information management in India’s deposit insurance system and steered the policy makers to restructure the same, thus driving the country consistent with its emerging market peers. The study further identifies best practices for aligning employees towards ethical behaviour in a virtual workplace and the pedagogical approaches for information management in the new normal.

Similar content being viewed by others

The Ethical Implications of Using Artificial Intelligence in Auditing

Ivy Munoko, Helen L. Brown-Liburd & Miklos Vasarhelyi

The role of digitalization in business and management: a systematic literature review

Esther Calderon-Monge & Domingo Ribeiro-Soriano

E-Commerce and Consumer Protection in India: The Emerging Trend

Neelam Chawla & Basanta Kumar

Avoid common mistakes on your manuscript.

Introduction

The importance of information management in the banking sector has gained traction among researchers in recent times. Bank depositors place their savings with banks with an assurance to withdraw their funds on demand, based on the nature of contracts. Likewise, banks grant loans of diverse maturities to different borrowers out of the resources received as deposits (Diamond & Dybvig, 1983 ). In this formal arrangement, banks act as intermediaries vested with the responsibility of ensuring disclosure, operational transparency and ethical compliance as an essential practice of corporate governance. Information sharing is important because it propels ethical compliance and market discipline Footnote 1 among banks, and provides all the stakeholders with the information they need to determine if their interests are protected. Retail depositors lack sufficient information about the operational efficiency of their banks and are unable to communicate with fellow depositors, which may impede their ability to collectively guard themselves against potential bank failures.

Before opening an account, banks want possession of copies of various personal documents to know their clients well. However, the depositor never knows how the money mobilised by banks is spent. Bank assets are opaque, illiquid and short of transparency, because most bank loans are typically tailored and confidentially negotiated. Customers are constrained by the information shared by bank managers since financial products are intricate and risky (Tosun, 2020 ). Banks are, thus, at a risk of self-fulfilling panics Footnote 2 due to their illiquid assets (loans, which cannot be recovered from borrowers on demand) and liquid liabilities (deposits, which can be withdrawn by depositors on demand) (Bryant, 1980 ; Diamond & Dybvig, 1983 ; Liu, 2010 ). Lastly, it is assumed that the volatility of one bank might cause a contagion effect, distressing a group of banks or perhaps resulting in a systemic failure altogether.

While banks are inherently volatile due to the nature of the functions they perform (Kang, 2020 ; Santos & Nakane, 2021 ), only few have realised the importance of integrating ethics into their operations. In business, the perspective of ethical concerns has shifted dramatically in the past two decades. If a firm wants to be seen as a truthful affiliate and an esteemed member of the industry, it must exhibit a high degree of ethical compliance and upright conduct (Sroka & Szántó, 2018 ). Nevertheless, the situation gets worse when fraudsters abuse loopholes in banking systems to ride on the coat-tails of critical world events such as the COVID-19 pandemic, and its corresponding speedy digital acceleration driven by community guidelines such as “stay home,” “contactless digital payments” and so forth. Cyber-crime and online data breaches (Patil, 2021 ), unethical lending (Pandey et al., 2019 ), under-reporting non-performing assets Footnote 3 (Agarwala & Agarwala, 2019 ), frauds (Sharma & Sharma, 2018 ; Sood & Bhushan, 2020 ), poor information sharing (Jayadev & Padma, 2020 ) and floppy corporate governance (Agnihotri & Gupta, 2019 ) have been the factors responsible for most bank runs in Asia in general, and India in particular, in recent years. In 2020, when the Philippines was hit hardest by the virus, phishing was estimated to have surged by 302 percent (Mohan, 2022 ). The same year saw online fraud to be the second most common type of offence reported to police in Indonesia; likewise, investment scams had the greatest impact on victims in Singapore, with about USD 52 million defrauded in over 1100 cases (Bose, 2021 ).

During the period 2009–2021, 69,433 cases of bank fraud were reported in India; in the financial year 2021, the central bank of India confirmed that until mid-September, the value of bank frauds amounted to ₹1.38 trillion (Statista, 2021 ). According to the National Crime Record Bureau, the overall number of incidents of online fraud in India was 2093 in 2019, but it jumped to over 4000 in 2020 after the COVID-19 outbreak. It is interesting to note that five cities such as Ahmedabad, Delhi, Hyderabad, Mumbai and Pune, which had 221 incidences of online frauds in 2017, experienced a massive hike to 1746 cases in 2020 (Dey, 2021 ).

“Organized crime has been quick to respond, mounting large scale orchestrated campaigns to defraud banking customers, preying on fear and anxiety related to COVID-19” (KPMG, 2022 , p. 1). The COVID-19 pandemic has wreaked havoc on the banking industry, increasing fears of online frauds and spiralling bad loans—as consumer and business debt levels soar. In early 2022, while India was staring the Omicron-led third wave of COVID-19, the Central Bureau of Investigation registered four major cases of bank fraud involving Bank of India, Union Bank of India, Bank of Baroda and Punjab National Bank for siphoning of funds that resulted in losses worth ₹ 939 crore for the said banks (Financial Express, 2022 ).

A bank is expected to foster public confidence by providing demand-driven services while adhering to ethical practices such as transparency, honest and timely disclosures for customer retention, security and trust. This is likely to lessen the risk of bank runs, Footnote 4 which serves in upholding the security and stability of banks—necessary for consumer protection. Previous studies have rarely investigated how seamless information sharing with the public—by banks, government and regulatory bodies—may moderate the opacity of the bank’s financial performance and inhibit panic runs through informed decisions by the customers. This is particularly important in the current times of risk and uncertainty wherein ethical concerns are perturbing the stakeholders of most businesses, particularly banks.

The present study shall explore the importance of business ethics, information sharing and transparency to build an information-driven society by scouting the case of Punjab and Maharashtra Co-operative (PMC) Bank, India, which defaulted on payments to its depositors and was placed under Reserve Bank of India’s (RBI) Footnote 5 directions due to a massive fraud perpetrated by bank officials. The auditors, too, were deemed lacking in their duties because they failed to notice the bank’s serious infractions. Since the depositors were permitted to withdraw only ₹ 1000 from their accounts (suspension of convertibility) and banking operations were stalled until further directions, there was panic among investors. In fact, “PMC was also India’s first crisis related to a bank which played out on social media” (Kaul, 2020 , p. 256). The crisis worsened when uninformed and panic-stricken investors advanced their narrative through fake news peddled via social media channels, WhatsApp and Twitter, resulting in alarm that caused deaths of numerous depositors.

Based on the aforementioned discussion, the authors of this study shall explore answers to the following questions:

What are the gaps in risk-management systems in India’s banking sector, specifically in the slackly regulated cooperative banks?

What are the best techniques for aligning employees towards ethical behaviour in a virtual workplace, and how should they be assessed?

What are the pedagogical approaches for information management and ethics education in the new normal?

The rest of the paper is as follows. The next segment explores theoretical background, followed by methodology, case study, discussion, directions for future research and conclusion.

Theoretical background

Evolving paradigm of business ethics.

The impact of the COVID-19 pandemic on global health, organisations, economy and society is intensifying relentlessly (Mahmud et al., 2021 ). The current pandemic has compelled businesses to embrace virtual space to a greater extent than earlier. This needs a comprehensive review of business ethics, among other things. An ethical decision is one that is accepted by a larger community because it adheres to moral guidelines (Reynolds, 2006 ). With the bulk of the personnel working online and maybe indefinitely in the future, a paradigm shift in business ethics, values and social responsibilities seems imminent and looming round the corner. Remote employees are expected to be disciplined with the ability to fulfil their duties with minimal supervision. Remote workers must also comprehend the nature of the task they would be undertaking and what it requires for a business to flourish. Finding solutions to reconcile the demands of work and personal life is the main problem of the new work-life model (Aczel et al., 2021 ).

The idea of an organisation’s social responsibility swings between two extremes: one that limits the organisation’s obligation to maximising profit for its shareholders, and another that broadens the organisation’s responsibility to encompass a wide variety of actors with a “stake” in the business (Argandoña, 1998 ). From an ethical standpoint, the stakeholder notion of social responsibility is more engaging for the common good (Argandoña, 1998 ; Di Carlo, 2019 ). “An individual or group is said to have a stake in a corporation if it possesses an interest in the outcome of that corporation” (Weiss, 2021 , p. 153). Stakeholders are persons or groups with whom the organisation intermingles or works together—any entity capable of influencing or being influenced by the organisation’s activities, preferences, strategies, objectives or practices (Gibson, 2000 ). Therefore, a firm is responsible for value creation for all its stakeholders, not just shareholders (Freeman et al., 2018 ). The importance of stakeholder interactions on corporate performance is particularly highlighted by instrumental stakeholder theory (IST), which calls attention to the effects of high-trust, high-cooperation, and high-information-sharing (Jones et al., 2018 ). Although IST is contested by Weitzner and Deutsch ( 2019 ), Harrison et al. ( 2019 ) claim that few firms have the ability to maintain strong economic performance while also treating their stakeholders ethically at all times. Through communal sharing ties, societal welfare can be improved in a Pareto-optimised manner, meaning that shareholders and some stakeholders benefit without any other stakeholders getting worse. Building strong relationships with stakeholders becomes an appealing strategy even for managers who are fixated on bottom-line results.

The importance of business ethics and moral conduct among leaders is evident in light of the recent high-profile ethical scandals (e.g., Enron) and growing expectations for ethical standards in management. Having a strong self-concept as a leader fosters ethical leadership, which is helpful to organisations as it encourages employees to perform well—both in their roles and outside of them (Ahn et al., 2016 ). Ethical frameworks encourage managers to modify salaries to the “efficiency wage” point, which is the best compromise between the interests of shareholders and employees, and hence the best way to sustain stakeholder relationships (Zhong et al., 2015 ).

Business ethics in banks

Banks and financial institutions are transforming digitally at a rapid pace employing new technologies and developing digital business models that are eventually helping them to create and add more value to their organisations. Given the pace at which workforce skills are being enhanced in the digital reality, these institutions are advancing towards a significant dearth of ethical skills. “The ethical peril of unfair contract terms is evident from the abuse of banks’ dominant position relative to bank consumers in dictating contractual terms and conditions, and asymmetrical information that causes significant imbalance of rights and obligations of bank consumers as the weaker contracting parties, placing them at a detriment” (Bakar et al., 2019 , p. 11). The three pillars of ethics in banking are “integrity”, “responsibility” and “affinity”. Integrity is imperative because it helps build the trust that any banking system needs to thrive. Responsibility necessitates contemporary banks to consider the effects of their lending policies. Affinity refers to fresh approaches to bring depositors and borrowers closer than they are in traditional western banking (Cowton, 2002 ). Herzog ( 2017 ) presents a duty-based explanation of professional ethics in banking. According to this viewpoint, bankers have obligations not just to their clients, who traditionally represent the core of their ethical obligations, but also to prevent systemic harm to entire societies. In order to best address these issues, regulation and ethics must be used in conjunction to align roles, rewards and incentives and produce what Parsons refers to as “integrated situations”.

Collins and Kanashiro ( 2021 ) emphasise the importance of ethics in banks by explaining how they follow a practice of secrecy in maintaining cash vaults by informing the branch manager of the first three digits while the assistant manager informed of the remaining three digits. If the managers violate the policy and collude to know all the six digits, they would be fired. Likewise, studies also suggest that employees are less likely to quit their jobs when they believe their organisation is empathetic and accommodating and provides an ethically supportive setting (Jeon & Kwon, 2020 ). A sustainable job performance can be reached by workers only through strong work ethics (Qayyum et al., 2019 ). It is necessary for employees to encourage ethical practice and prevent unethical deeds that can harm the company’s image and performance, particularly with respect to small organisations (Valentine et al., 2018 ). Work ethics contribute to employees’ job performance depending on how much an individual fosters honesty, prudence, quality, self-control and cooperation while discharging their duties (Osibanjo et al., 2018 ). Even so, the banking business is plagued by a variety of ethical problems, including a lack of adequate ethics training, problems with trust and transparency, increased pressure of competition, the complexity of financial operations and the problem of money laundering, among others (Kour, 2020 ).

Ethically responsive education: challenges and way ahead

Business schools have traditionally assumed that executive education is either delivered online or in-person and that online executive education programmes are substandard than in-person programmes (González-Ramírez et al., 2015 ). This is no longer true. Drawing from their experiences during the pandemic, educators and their institutions are shifting to “omnichannel” programme models, where executive learners have a seamless and engaging learning experience across all channels and platforms through which they participate. While ethical practices are important for an enterprise, business schools face numerous hindrances in their efforts to promote ethical standards in their students (Sholihin et al., 2020 ). Virtual technology allows students to learn practical skills without leaving the classroom. Furthermore, moving from a physical class to a virtual setting can give real-time imagery and interface in a simulated world that is extremely close to the real world, allowing students to gain practical insights without having to leave their homes. Simulations give students room to test out their course knowledge and make leadership decisions through the lens of real-life situations—all in the safety of a virtual class. As a result, virtual technology might be one of the learning media to motivate students studying at home during a pandemic (Chuah et al., 2010 ). However, as pointed out by Bhattacharya et al. ( 2022 ), the support that the institution offers during the transition to online learning, faculty acceptance and adoption of the new technology, and adaptation of the teaching and learning pedagogy to the new medium, are factors that determine whether the abrupt shift to online learning is successful in meeting the needs of students with various learning preferences and abilities. The effectiveness of online learning depends largely on how interesting and dynamic the class sessions are designed by getting students to participate in discussions, role plays, browsing online links, engaging in polls, taking quick quizzes, etc.

Methodology

This study draws upon secondary sources and adopts a case-based approach to explore the role of ethics in business in a dynamic world that is gradually shifting towards virtual technology in the milieu of the global pandemic. The advantage of a case study is that it aims to investigate a current occurrence in its natural setting (Yin, 2017 ). In this study, papers dealing with a wide range of diverse themes relating to business ethics were reviewed. Also, relevant press releases by RBI and Deposit Insurance and Credit Guarantee Corporation (DICGC), newspaper accounts, videos, media narratives, annual reports and recast balance sheet of the PMC Bank were examined. Every fact was cross-checked from two different sources in order to establish the accuracy of the case information. Anything that did not meet this criterion was left out of the analysis. The data was gathered over a period of 2 years to track the changes in the work environment—before and during the pandemic—and to closely examine the multifarious developments that occurred ever since the crisis at PMC Bank came to light. Despite the authors’ attempts to speak with the irate PMC Bank customers to solicit their responses and reactions, the latter declined to do so due to the emotional trauma they had already experienced, and the sense of utter helplessness they felt following numerous unsuccessful attempts to knock at the doors of the relevant authorities. As a result, they denied to participate in the survey, a major limitation of this study.

The authors selected the case of PMC Bank as it featured among the top bank frauds in India towards the close of the previous decade (Sengupta, 2022 ). The PMC bank failure exposed several loopholes in information management in India’s deposit insurance system (DIS) Footnote 6 and steered the policy makers to restructuring the same, thus driving the country consistent with its emerging market peers. In March 2020, the Banking Regulation (Amendment) Bill was introduced in the lower house of the Indian Parliament to avoid a PMC Bank–like crisis in the future. While administrative matters would continue to be governed by the Registrar of Cooperatives, the bill aimed to apply banking regulation principles of the RBI to cooperative banks. Additionally, it suggested that cooperative banks be strengthened by raising professionalism, facilitating capital access, enhancing governance and assuring sound banking through the RBI. Following the failure of PMC Bank, the Union Cabinet amended the DIS in India and addressed an enduring concern of the depositors of troubled banks. In 2020, the deposit insurance (DI) cover was raised from ₹ 1 lakh to ₹ 5 lakhs with the approval of Government of India (RBI, 2020 ), and banks were mandated to disclose this information on their respective websites. Since July 2021, the depositors of distressed banks were permitted to withdraw their holdings from the accounts—up to the highest insured amount—within 3 months since a bank was placed under moratorium by the RBI (Kumar, 2021 ). The RBI also got the ball rolling to prevent scams such as the one perpetrated by PMC by enforcing a set of criteria for the hiring of managing directors and chief risk officers in banks; levying fines (for regulatory lapses); calling for higher reporting standards; developing a big data centre that could access data from banks’ systems; and proposing differential deposit insurance premium for banks, contingent on their risk profile. Likewise, the RBI issued new provisioning norms for primary cooperative banks’ inter-bank exposure as well as valuation of their perpetual non-cumulative preference shares and equity warrants, directing them to continue making provisions of 20% for such exposures, in the aftermath of the PMC Bank’s bankruptcy.

The case of Punjab and Maharashtra Co-operative Bank, India

About pmc bank.

The PMC Bank was functioning as a multi-State scheduled primary co-operative bank in India, with its area of operation extending over seven states viz., Andhra Pradesh, Delhi, Goa, Gujarat, Karnataka, Madhya Pradesh and Maharashtra. With a modest beginning in 1984 as a unit bank, the business later expanded over a vast network of 137 branches in less than four decades. Empowered by a mission “to emerge as a strong, vibrant, most preferred premier co-operative bank, committed to excellence in serving the customers, and augmenting the stakeholders’ value through concern, care and competence”, the bank gradually gained the trust of its customers by reaching numerous milestones such as earning the “Scheduled” Footnote 7 status by the RBI and consent to venture into the forex business (PMC Bank, 2021 ). The following years brought laurels to the bank in the form of recognition for “lowest dispute ratio” as well as “work ethics oriented to depositors’ service” by the All-India Bank Depositors’ Association; “Best Bank Award” by diverse State Co-operative Banking Associations; and so forth.

In the early weeks of September 2019, the RBI received information from a whistleblower that the PMC Bank was undertaking fraudulent activities which involved the bank’s board of management (Hafeez, 2019 ). The complaints pointed out that certain loans of PMC should have been classified as non-performing assets (NPAs) but were concealed in the bank’s loan account system. In response to these complaints, the RBI started investigations. On September 23, 2019, RBI placed restrictions on the PMC Bank citing “major financial irregularities, failure of internal control and systems of the bank, and wrong/under-reporting of its exposures under various Off-site Surveillance reports to RBI” (RBI, 2019 ). The RBI acted in quick time and took control of the bank’s operations to assuage any risk of a bank run. To protect the interests of depositors, RBI placed PMC Bank under “Directions” vide Sect. 35-A read with Sect. 56 of the Banking Regulation Act, 1949 (RBI, 2019 ). Subsequently, PMC was refrained from fresh lending, accepting deposits and making investments for six months Footnote 8 (Singh, 2021 ). According to a report by BloombergQuint ( 2019a ), at the heart of the PMC Bank crisis stood the fact that several bank officials manipulated their books and their IT system to conceal the loans given to the real estate developer Housing Development and Infrastructure Limited (HDIL). A primary cooperative bank Footnote 9 could lend up to 15% of its total capital to a single company—a norm violated by PMC (Kaul, 2020 ). The bank’s then Managing Director, in his confession letter to the RBI, claimed that PMC Bank’s exposure to the large corporate group—HDIL—was just about ₹ 2500 crores (Gadgil, 2019 ). However, PMC’s actual exposure to the HDIL group stood at ₹ 6500 crore, accounting for 73% of the aggregate loan book size of ₹ 8880 crore and nearly four times the regulatory cap as of September 19, 2019 (Rebello, 2020 ). The six board members of PMC had approved loans to HDIL, the largest borrower of the bank, by breaching the RBI’s exposure limit not just to HDIL, but also the Uttam Galva Group and Abchal Group (Rajput & Vyas, 2019 ). PMC had extended loans worth ₹565 crores Footnote 10 to Uttam Galva Group—an exposure in excess of the limits set by the RBI (BloombergQuint, 2019b ). There is limited public information on the Abchal Group or its promoters.

Things changed around in 2012–2013 when HDIL started defaulting on the dues owing to cancellation of a slum rehabilitation project near the Mumbai airport—a major setback to the real estate group. Even though the outstanding loans with the group swelled, the bank’s management did not classify them as NPAs, fearing a hit in the balance sheet. They were also apprehensive of reputational loss and facing regulatory action from the RBI. The Economic Offences Wing of Mumbai Police uncovered that the bank’s management had replaced 44 loan accounts of HDIL with over 21,000 fictitious loan accounts—all this in an effort to camouflage defaults by the HDIL group (Ozarkar, 2019 ). PMC bank incurred losses to the tune of ₹ 4355 crores (Seetharaman, 2019 ). Despite these losses, PMC continued to support HDIL owing to the relationship shared between the duo.

The relationship between the PMC Bank and the promoters of HDIL group dated back to the 1980s when the latter had first aided the bank by infusing capital of ₹13 lakh, and also placed a huge sum of deposits for the bank’s revival. Furthermore, when the bank was facing a run on its deposits in 2004, HDIL pumped in ₹ 100 crore to deal with the liquidity crunch that enabled the cash strapped PMC bridge over the crisis. As a result, more than 60% of the bank’s transactions were with the HDIL group. The PMC Bank would charge 18–24% interest from the group accounts and make good profits. Meanwhile, the HDIL group maintained that its banking relations with PMC were clean and the audits presented a true and fair picture (BloombergQuint, 2019b ).

Although HDIL had an impressive record of clearing dues despite certain delays, PMC Bank continued to report the loan accounts as standard assets—albeit they were gradually downgrading to substandard and doubtful categories. All this went unnoticed as statutory auditors were looking at only incremental advances and scrutinised accounts shown by the management (Dalal & Sapkale, 2019 ). Prior to 2015, RBI looked at only the top accounts of the bank. Since loans to HDIL were spread across multiple accounts, they never showed up in the RBI’s inspection. Post 2017, when RBI started looking into the “advances master”, PMC replaced the accounts belonging to the HDIL group with dummy accounts—of small amounts—to escape detection by the regulator (Ozarkar, 2019 ).

The modus operandi

According to a report by BloombergQuint ( 2019a ), experts claim that whenever an auditor or an RBI inspector looks at the books of a bank, they examine the top 50–100 accounts that the bank is exposed to. In the case of PMC Bank, these accounts were masked by holding too many accounts with little funds to avoid any suspicion, by manipulating the bank’s core banking system, officially known as the “core banking solution (CBS) Footnote 11 ”. All bank employees have access to the CBS—from a teller to the branch manager, to loan officers and risk managers—but their access and what they can do with the system is limited to their exact area of function. The CBS is essentially a back-end intelligence software. It provides the analytics for decision-making to the bank staff whenever bankers physically input data. So, the CBS has a “rule-engine” which is controlled by an access-control framework, letting only certain people alter the rules. Usually, every bank appoints an IT administrator for managing the CBS, who is the only person allowed to modify the software. According to forensic experts, whenever there is fraud at a bank, the “rule-engine” is compromised. Therefore, by giving limited access to the rule-engine, other employees—such as those in the credit department or risk management division—have little information of the changes made to the CBS. Thus, by creating 21,000 dummy accounts in bogus names to conceal from the auditors and RBI inspectors, other departments of PMC were perhaps in the dark the whole time the bank was exposed to the HDIL group.

The RBI in its investigation established that out of 1800 bank employees, only 25 employees had access to the loan accounts of the bankrupt real estate developer and its group entities (Hakim, 2019 ). These bank officials assigned specific codes to the accounts belonging to the HDIL group in order to disguise the money in the loan accounts. When the suppression of true accounts became too much for the employees, the management decided to come clean to the RBI. PMC was instructed to recast its balance sheet to present an accurate and honest portrayal of the bank’s assets (PMC Bank, 2019 ). Investigating agencies promptly arrested several bank executives including three top officials of the PMC bank, as well as two promoters of the HDIL group.

Depositors’ backlash

The cap on withdrawals came heavily on depositors, particularly those who held all their savings with the PMC Bank. The deposit withdrawal restrictions sparked off a massive public outcry as customers were unable to pay their bills. Ironically, the bank that clients had trusted to keep their money safe had now become the source of their woes. It was difficult to survive on minimal amounts. Businesspersons reported how their business operations had stalled, leaving them to survive on loans from relatives and friends. Several account holders could not access savings, much needed to meet their medical needs. Likewise, deaths due to cardiac ailments and suicide were reported. Footnote 12 Distressed depositors held protests outside the PMC Bank and the RBI quarters to permit withdrawals of their lifetime savings. During the same time, numerous WhatsApp videos started circulating among the aggrieved depositors and the news fired up on mainstream and social media (Kaul, 2020 ). Poor lending norms and questionable governance had afflicted the banking system, in part due to professional incompetence to assess project viability, and in part due to the political economy that permits, even nurtures, credit to privileged parties (partisanship). A fake news that went viral on online platforms was the speculation that the government was proposing to close nine public sector banks. This raised qualms about the systemic stability of banking in India, which compelled the RBI to issue a press release that no such plan was in the offing. “PMC Bank is too tiny to pose a systemic threat, but a small, dead canary in a coalmine is still a large warning sign” (Mukherjee, 2019 ).

In response to people’s anxiety and backlash, the RBI raised the withdrawal limits for PMC depositors from time to time, as illustrated in Table 1 . Deposit withdrawals were permitted to ₹ 1 lakh in exceptional situations such as wedding, education, livelihood, and other adversities. At the same time, in February 2020, the DICGC Footnote 13 was authorised to raise the deposit insurance coverage for a bank depositor, from ₹ 1 lakh to ₹ 5 lakh per depositor—an amendment brought into force after 27 years—since the previous one was initiated in 1993 (Nayak, 2020 ).

Simultaneously, depositors of insolvent or stressed banks that were placed under a central bank moratorium were entitled to recover their funds (up to ₹ 5 lakh) within 90 days of the commencement of the moratorium. The 90-day span would be split into two periods of 45 days. The RBI mandated: “The stressed bank on whom restriction is placed is expected to collate all information regarding the number of claimants and claim amount and inform DICGC about it within the first 45 days. Within the next 45 days, DICGC is mandated to process the claim and make payment to each eligible depositor” (Motiani, 2021 ). However, customers of PMC Bank were exempted from receiving ₹ 5 lakh in the first lot as the bank was under the resolution process.

Following the PMC debacle, the RBI strengthened its control by necessitating primary cooperative banks to submit quarterly reports of individual loan exposures above ₹ 5 crore to the Central Repository on Information on Large Credits (The Economic Times, 2020 ). The RBI established a big data centre to retrieve data from banks’ systems. The data centre would aid in the prevention of scams such as the one perpetrated by PMC Bank, in which data was camouflaged through the use of phoney accounts (ETBFSI, 2021 ).

The PMC bank takeover

In the second half of 2021, nearly 2 years after the PMC scam had come to light, Centrum Finance Services Footnote 14 was given “in-principle” approval by the RBI to establish a small finance bank that would take over the scam-plagued PMC Bank. Two distinct entities—the Centrum and BharatPe Footnote 15 syndicate (with 51:49 stake)—were collectively permitted to acquire the PMC Bank. Accordingly, Centrum and Resilient Innovation Private Limited (a BharatPe enterprise) were authorised to set up a small finance bank—which would hold the assets and liabilities of the PMC Bank (Panda & Lele, 2021 ). In October 2021, the Unity Small Finance Bank (USFB) got licence from the RBI and started its operations in record time with an equity capital of ₹ 1100 crore (Banerjea, 2022 ). The RBI came up with a draft plan for the merger of the beleaguered PMC Bank with the new entity, USFB. Depositors could claim up to ₹ 5 lakhs over a 3- to 10-year period, according to the proposal. They could receive up to ₹ 50,000 after 3 years, ₹ 1 lakh after 4 years, ₹ 3 lakh after 5 years, and ₹ 5.50 lakh after 10 years (The Economic Times, 2021 ). On January 25, 2022, the amalgamation of PMC Bank with USFB officially came into force. All the branches of PMC Bank would operate as branches of USFB, ensuring job security and stability to the employees of the merged entity, alongside consistent services to the clients. Since the draft amalgamation plan was opposed by an umbrella body of cooperative societies, the lead bank—USFB—came up with a press release: “96 percent of depositors, have deposits up to Rs 5 lakhs, will be paid upfront (subject to completion of the requirements as per DICGC rules). These depositors can choose to either withdraw or retain this amount with Unity Bank; or make additional deposits, and take advantage of the attractive interest rate up to 7%, being offered on savings accounts” (CNBC, 2022 ). Thus, the long-drawn-out scandal that stretched over 2 years ended up with the PMC takeover by USFB that was enforced in the larger interests of all the stakeholders.

The ethical stance

The PMC Bank failure is a classic case of ethical collapse, wherein the board of management and a few employees took a drastic step of compromising the interests of diverse stakeholders, with little thought to the ramifications it would have on those involved with the bank. This was earlier exemplified by Harris and Bromiley ( 2007 ), as well as Murthy and Gopalkrishnan ( 2022 ), while discussing the behavioural theory of the firm and the factors driving financial misrepresentation in the corporate world. The integrity and ethical commitment of senior management, the ethical policy of an organisation and the external pressure it is exposed to, have an impact on the ethical behaviour in the organisation, which further has an impact on the overall performance of small and mid-size enterprises (Abalala et al., 2021 ). Employees are not recruited on the basis of ethical considerations. Just as they acquire job skills through education, training and practice, they learn to be more or less ethical based on events and individual experiences over a period of time. Companies devote the most resources to environmental policies, but the fewest to actions that promote ethics and deter unethical behaviour (Abidin et al., 2020 ). From the standpoint of human resource development, several organisations consider ethics education as a one-time affair by developing an ethical code of conduct and stating it in their bye-laws. If they do address ethics later, it is mostly by instituting whistleblower laws (Schultz & Harutyunyan, 2015 )—similar to “being wise after the event” instead of “being safe than sorry”. Such practices may check unethical conduct or castigate the outlaws, but they may not help the employees evolve as moral individuals at workplace. Ethical education is a lifetime process and is not a cramming exercise. Employers should create an environment that nudges employees to be morally sound by reflecting moral values. They should make honesty, truth, fairness, sincerity, community service, moral mettle and reverence for others their guiding principles in business dealings (Okpo, 2020 ). The benefits of ethical establishments are manifold. Employees find such businesses more appealing than others as they are seldom involved in scams. They are also favoured by investors, who target good governance and strong cultures as foundations of enduring value creation. Ethical codes have been lauded as a clear path to more sustainable and sound organisational behaviour (Adelstein & Clegg, 2015 ).

Cases of cooking the books such as Enron (Arnold & De Lange, 2004 ; Benston & Hartgraves, 2002 ; Reinstein & McMillan, 2004 ), World Com (Wang & Kleiner, 2005 ), Tyco (Sorkin & Berenson, 2002 ), Sub-prime Mortgage Crisis (Adjei, 2010 ), Satyam (Bhasin, 2016 ) and the garment industry disaster in Bangladesh (Taplin, 2014 ) have raised ethical awareness and demonstrated that companies can suffer acute reputational and financial loss when their unethical transactions are discovered (Banerjee, 2015 ). When such incidents come to light, they frequently include a huge scandal that has a significant influence not just on the organisation, but also the entire industry or even the global economy (Halinen & Jokela, 2016 ). The PMC Bank crisis was a signal to the nation of a larger problem in the Indian banking system that needs to be fixed with basic governance reforms (Gupta, 2021 ). The regulatory body should have acted sooner to avoid a situation that caused panic among depositors, some of whom had deposited their entire life savings in the bank. Despite its immense resources and power, the RBI chose to focus on routine checks rather than digging further. According to Dastidar ( 2016 ), despite the fact that appropriate law has been adopted to control banking activities in India and to provide a fairly competitive environment, the regulations and penalties are insufficient to guarantee operations in a disciplined manner. While bankers receive behavioural training, the routine monitoring of staff behaviour is insufficient. Customers are either unaware of how to file a complaint against bank employees with a higher authority or simply disregard the process, believing it to be inconvenient.

Therefore, business ethics and corporate governance should be a part of all accounting and business curriculums (Abdolmohammadi, 2008 ; Acevedo, 2013 ), particularly in the current times, when the line between our personal and professional life has gotten increasingly blurry. Work and life are more linked than they have ever been (a trend invigorated by the COVID-19 pandemic). This is partly because Millennials and Generation Z spend a large time at work and are far more connected through video-communication and social media platforms such as Google, Facebook, LinkedIn, Twitter and WhatsApp. There are rules to follow, clients to serve, contracts to honour and communities to interact with, at jobs. Eventually, exposure to each can help enhance the understanding about ethics. A significant question that begs to be answered is “How can companies assist their employees in using the workplace as a character-developing laboratory?”.

One of the ways is experiential learning. For instance, in January 2002, social media went gaga after a video of a farmer being mistreated at a Mahindra car dealership went viral. The Chairman of the Mahindra Group was also informed of the occurrence. He stated that the key value is to protect an individual’s dignity, and that if someone violates the policy, it would be dealt with quickly. The Chief Executive Officer of the Mahindra Group was quick to respond too: “Dealers are an integral part of delivering a customer centric experience & we ensure the respect & dignity of all our customers. We are investigating the incident & will take appropriate action, in the case of any transgression, including counselling & training of frontline staff” (Khatri, 2022 ). Thus, learning by doing is hands-on and engaging, with the instructor acting as a guide. Nevertheless, experiential learning has been sluggish to take off as a technique for business ethics training (Meisel, 2008 ), although it has been popular in academic circles and management development programmes.

Professor Scott Reynolds proposes “a neurocognitive model of the ethical decision-making” (Reynolds, 2006 ) by initially pointing out his findings to the four-step process first theorised by Rest ( 1979 , 1986 ). The recognition of the ethical dilemma, according to Rest, is the first step in making ethical decisions. The individual then takes an ethical decision, declares an intention to act ethically and ultimately acts ethically. Ethics education, however, is a contentious topic. Some people argue that ethics cannot be learned (McKenzie & Machan, 2003 ). Others feel that ethics can be imparted, although they differ with respect to the method of delivery (Gautschi & Jones, 1998 ; Pfeffer, 2003 ).

According to the neurocognitive paradigm (Reynolds, 2006 ), ethics education is feasible—ethical decision-making can be enhanced through a variety of methods. However, the model recommends that methods of instruction should be tailored to the situation at hand. Ethics education should concentrate on the “mental structures of prototypes” (Reynolds, 2006 , p. 745) and moral standards in order to be effective, but it should be accomplished through a variety of methods. Employees may join an organisation with strongly ingrained preconceptions about managerial challenges such as corruption, scam, deception and harassment, which, regrettably, may not reflect what the organisation considers to be the morally suitable outcome in some situations. This is not to say that these prototypes cannot be changed. Ethics education must confront deep-rooted stereotypes and dig them out of unconscious processing of the employees so that they can be reviewed and modified accordingly. Role-playing and small-scale group discussions are examples of activities that can help achieve these goals (Gioia, 1992 ).

Likewise, the organisation must offer fresh prototypes for new ethical circumstances as they arise, and employees must be exposed to such prototypes on a frequent basis (Reynolds, 2006 ). As a case in point, there is growing consensus on previously uncharted ethical territory such as inspection of electronic mail, staff supervision and genetic screening (Beauchamp & Bowie, 2004 ); employees can consolidate them into their decision-making based on the extent to which organisations impart these norms consistently. The intense, yet gradual, indoctrination of ethically sound prototypes will spontaneously result in ethical outcomes by employees. Regardless of the significance of prototypes, the neurocognitive model supports an age-old pedagogical belief that ethics education should offer broad principles or benchmarks for decision-making (Sims, 2002 ). The corporate environment is always changing, and in the virtual workspace, employees are frequently working in new environments where conventions have yet to be formed and prototypes are limited. Therefore, employees frequently count on their higher-order cognitive skills (Stenmark et al., 2020 ), and, as any skilled tradesman, they require the tricks of the trade to do so effectively (Stenmark et al., 2019 ). The more an organisation can equip employees with moral norms to apply in diverse circumstances (as well as opportunities to apply them), the more likely they will utilise them to effectively solve their issues. To effectively mould ethical behaviour, organisations must offer tools for innovative ethical decision-making and a steady stream of pre-set paradigms with built-in moral implications (Reynolds, 2006 ).

Organisations can also adopt “Performing a Project Premortem” which, in a corporate setting, occurs at the start of a project, allowing it to be enhanced rather than autopsied (Klein, 2007 ). For instance, in the virtual space, a bank conducted a session to identify the best possible practices of serving the customers seeking financial statements by contacting customer care via phone. In this session, the bank manager sought responses from customer care executives, asking them how would they prevent unauthorised access and confirm the authenticity of a customer—establishing contact through phone—before releasing a financial statement via email. One of the executives responded that he would ask the account number, branch address, date of birth, registered mobile number and email credentials before releasing the statement to the customer. Another executive stated that apart from seeking the aforementioned details, he would also encrypt the financial statement with the account holder’s Customer ID Footnote 16 so that only the legitimate person could access it. The premortem allowed the customer care executives to adopt best practices while rendering services in the new normal so that third parties might not use confidential data in ways that were inconsistent with the bank’s ethical values. Such exercises can be undertaken from time to time to assess the employees’ ethical compliance and elicit a paradigm shift in the way people think about character development in the virtual workplace.

• Information management

In this age of widespread digitalisation, an individual intending to open a bank account is expected to submit numerous personal documents to confirm their domicile. While this information is expected to remain confidential, the bank assumes control over the shared data, and indicates a possibility of using it for internal purposes if it so chooses. Likewise, if an individual avails credit from a bank, the latter may seek myriad information, considering itself to be a majority stakeholder in the transaction. However, if a depositor enquires about how the bank uses their funds and who it lends to, the bank is likely to respond with a frigid silence (Bakar et al., 2019 ). The average person rarely has the opportunity to question the bank, which is a biased practice given that deposits are the lifeblood of the Indian banking industry. They hold more than half of the nation’s savings and greater than 80% of a bank’s liabilities. In comparison to China, Hong Kong and Singapore, India’s reliance on deposits is the highest among emerging economies (Karthik, 2021 ). However, depositors have few options to safeguard their deposits. Simply said, deposits are critical to the banking system, but banks rarely go to the same lengths to safeguard depositors’ interests and privacy as they do for major firms. The failure of PMC Bank in India, along with many others from the private and the cooperative sector, makes for a compelling reason for transparency and fair disclosures on the part of banks as well as regulatory authorities. In each of these circumstances, several rules had to be relaxed in order to prevent the bank’s failure from affecting the country’s financial system. The PMC Bank case raises important concerns about the monetary authority’s efficacy as a regulator. Additionally, it draws attention to the critical flaws in Indian banking industry’s risk-management procedures (Hafsal et al., 2020 ), particularly in the loosely regulated cooperative banks.

Public awareness of deposit insurance is abysmally low in India, which limits informed decisions by depositors (Nayak et al., 2018 ; Singh, 2015 ). Moreover, India follows a partial deposit insurance system; in the event of a bank failure, only a capped amount is received by the depositors of a single bank. However, people believe their money is safe the moment they deposit it with a bank, ignoring the fact that banking is just another business (Kaul, 2020 ). Quantitative statistics are frequently included in the banks’ annual reports. They include information on deposits, loans and advances, capital adequacy, income recognition, asset quality, provisioning against bad debts, etc. Nonetheless, when it comes to loans and advances, it is generally the qualitative part that causes a bank to fail. PMC Bank was one of the several banks in India where blanket lending practices resulted in capital erosion. The case right now is a call for more transparency in India’s banking system, particularly in a virtual world marked by extensive digitalisation.

Future research directions

Studies so far have examined the role of ethics in diverse situations and sectors. However, there is limited research on whether ethics education should be conducted differently for stakeholders in remote workplace as against on-site work. Also, if organisations are attentive to goodwill and brand name, what are the causes that deter them from ethical conduct? Furthermore, if performance-linked incentives can motivate employees to achieve promising outcomes, can an organisation introduce ethics-linked incentives to boost employee productivity? Previous studies have rarely investigated how seamless information sharing with the public may moderate the opacity of an organisation’s performance and reinforce informed decisions by the customers. This is particularly important in the current times of risk and uncertainty wherein ethical concerns are perturbing the stakeholders of most businesses, particularly banks. In the banking industry, assessing behavioural characteristics for risk mitigation is still unexplored. The personality factor can aid in understanding the mental aspects as well as the reasons for the association of dark triads with economic crimes. Researchers can explore these uncharted areas.

Conclusion and recommendations

The PMC Bank crisis is only the most recent manifestation of deeper, unresolved issues in India’s banking industry. The persistent concern of non-performing assets (NPAs), which was exacerbated in the case of cooperative banks in India due to poor governance and a risky business strategy, lies at the core of the crisis. Regulators have, sadly, just responded to symptoms thus far; there is little indication that they have a thorough knowledge of the underlying condition. In order to prevent crises like the one that has befallen PMC—where an astonishing 73% of the loan book was represented by one corporate group with close relationships to the bank—cooperative banks need substantial restructuring in their governance. The direct appeal made by numerous irate depositors, which was widely shared on social media, is another intriguing aspect of how the public has responded to the PMC Bank situation. Some of the viral videos show utterly upset, destitute depositors literally screaming and begging for aid. Such a response is difficult to envisage in developed economies, where the unsatisfied public’s response would more likely be indignation at the incompetence of politicians and regulators, than one of entreaty.

While the COVID-19 pandemic has compelled businesses to embrace virtual space to a greater extent than earlier, this calls for a comprehensive review of business ethics, among other things. Ethics education is feasible, and ethical decision-making can be enhanced through a variety of methods. The corporate environment is ever changing, and in the virtual workspace, employees are frequently working in new environments where conventions have yet to be formed and prototypes are limited. Organisations must offer fresh prototypes for new ethical circumstances as they arise, and employees must be exposed to such prototypes on a frequent basis. To effectively mould ethical behaviour, organisations must offer a steady stream of pre-set paradigms with built-in moral implications.

At the same time, bankers must be transparent for customers to receive the pertinent information they need to make sound financial decisions. Customers frequently lack the resources and financial language expertise necessary to grasp the complex financial products and services. As a result, they are unable to comprehend or obtain accurate, understandable and/or thorough information regarding a variety of products, thus leading them to choose poorly or inadvertently. There are inherent information asymmetries in the financial sector, with bankers having more information than customers, which burdens the latter due to low financial literacy and complexity of financial products. Therefore, thorough disclosures regarding the product and its features become a crucial component to close this gap. At the same time, these disclosures should not result in information overload, which could reduce the value of the advice given. Fair and forthright disclosures give clients the ability to compare various products from different service providers, enabling them to make an informed choice. An enhanced customer knowledge would also encourage competition, which would improve the standard of services provided by the digital platforms. Fair customer treatment typically entails moral behaviour, appropriate sales tactics and handling of client information. Even though fair treatment concepts are well understood, it is challenging to hard-code these in regulations. However, the fundamental idea that the consumer should always be treated fairly and with respect persists. This takes on increased significance in digital banking, because the target clients may comprise typically small customers with little access to or knowledge of grievance redressal mechanisms. Banks can set up cyber security awareness initiatives to inform clients of the risks associated with phishing, malware, wire fraud, and more when using online banking. Customers can have access to a distinctive online library of learning aids, which includes newsletters, email campaigns, movies, posters and articles on information security awareness. The first essential step towards effectively managing risks, reducing fraud and ensuring compliance is to educate the board of directors and customers about social engineering risks and best practices in information security.

Market discipline refers to a practice by which market actors, such as depositors and shareholders, oversee bank risks and take steps to minimise unwarranted risk-taking.

In fractional reserve banking systems, banks hold limited amounts of cash hoping that all depositors will not withdraw at the same time. Nonetheless, banks are exposed to the risk of self-fulfilling panics caused by mass hysteria that leads their customers to withdraw the funds at the same time for fear that the institution may go kaput.

A loan for which the principal or interest payment is more than 90 days past due.

Depositors who attempt to withdraw their money from a bank in a coordinated effort because they believe the bank will fail.

Central Bank (Monetary Authority) of India.

A deposit insurance policy that protects against losses on bank deposits if a bank goes bankrupt and has no funds to pay its depositors, forcing it to liquidate.

Banks registered in the second schedule of the Reserve Bank of India Act, 1934.

The “Directions” were later extended up to June 30, 2021.

Urban Co-operative Bank.

Since it is a classic case of cooking the books, diverse sources have claimed different figures.

Core banking system is the core ledger and account management system for banks. It collects relevant financial as well as non-financial information, data and documents for all the depositors and borrowers. It also automatically prepares daily accounts for a bank as a whole, which are used for regulatory and compliance purposes. “As on March 31, 2019, of the 1542 primary cooperative banks in the country, over 1436 banks had implemented CBS”.

The exact number of deaths is still unknown, although the cause is “severe stress” caused by a suspension of withdrawals.

The autonomous body instituted by the RBI to insure bank deposits in the event of bank failure.

Centrum Capital is a Bombay Stock Exchange-listed entity.

A fintech company.

A unique identification number given to every customer holding an account with a bank.

Abalala, T. S., Islam, M. M., & Alam, M. M. (2021). Impact of ethical practices on small and medium enterprises’ performance in Saudi Arabia: An partial least squares-structural equation modeling analysis. South African Journal of Business Management, 52 (1), 11. https://doi.org/10.4102/sajbm.v52i1.2551

Article   Google Scholar  

Abdolmohammadi, M. (2008) Who should teach ethics courses in business and accounting programs? In C. Jeffrey (Ed.),  Research on professional responsibility and ethics in accounting (vol. 13, pp. 113–134). Emerald Group Publishing Limited. https://doi.org/10.1016/S1574-0765(08)13006-0

Abidin, A. F. Z., Hashim, H. A., & Ariff, A. M. (2020). Commitment towards ethics: A sustainable corporate agenda by non-financial companies in Malaysia. Journal of Sustainability Science and Management, 15 (7), 164–182. https://doi.org/10.46754/jssm.2020.10.014

Acevedo, A. (2013). But, is it ethics? Common misconceptions in business ethics education. Journal of Education for Business, 88 (2), 63–69. https://doi.org/10.1080/08832323.2011.639407

Aczel, B., Kovacs, M., Van Der Lippe, T., & Szaszi, B. (2021). Researchers working from home: Benefits and challenges. PLoS ONE, 16 (3), e0249127. https://doi.org/10.1371/journal.pone.0249127

Adelstein, J., & Clegg, S. (2015). Code of ethics: A stratified vehicle for compliance. Journal of Business Ethics, 138 (1), 53–66. https://doi.org/10.1007/s10551-015-2581-9

Adjei, F. (2010). Debt dependence and corporate performance in a financial crisis: Evidence from the sub-prime mortgage crisis. Journal of Economics and Finance, 36 (1), 176–189. https://doi.org/10.1007/s12197-010-9140-0

Agarwala, V., & Agarwala, N. (2019). A critical review of non-performing assets in the Indian banking industry. Rajagiri Management Journal, 13 (2), 12–23. https://doi.org/10.1108/ramj-08-2019-0010

Agnihotri, A., & Gupta, S. (2019). Relationship of corporate governance and efficiency of selected public and private sector banks in India. Business Ethics and Leadership, 3 (1), 109–117. https://doi.org/10.21272/bel.3(1).109-117.2019

Ahn, J., Lee, S., & Yun, S. (2016). Leaders’ core self-evaluation, ethical leadership, and employees’ job performance: The moderating role of employees’ exchange ideology. Journal of Business Ethics, 148 (2), 457–470. https://doi.org/10.1007/s10551-016-3030-0

Argandoña, A. (1998). The stakeholder theory and the common good. Journal of Business Ethics, 17 , 1093–1102. https://doi.org/10.1023/A:1006075517423

Arnold, B., & De Lange, P. (2004). Enron: An examination of agency problems. Critical Perspectives on Accounting, 15 (6–7), 751–765. https://doi.org/10.1016/j.cpa.2003.08.005

Bakar, N. M. A., Yasin, N. M., & Teong, N. S. (2019). Banking ethics and unfair contract terms: Evidence from conventional and Islamic banks in Malaysia.  Journal of Islamic Management Studies ,  2 (2), 11–26. http://publications.waim.my/index.php/jims/article/view/128/44 .

Banerjee, R. (2015). Who cheats and how?: Scams, fraud and the dark side of the corporate world (1st ed.). SAGE Response.

Banerjea, A. (2022). Unity SFB says 96% of PMC Bank's depositors will be paid upfront. Business Today.  Retrieved 28 July 2022, from https://www.businesstoday.in/industry/banks/story/unity-sfb-says-96-of-pmc-banks-depositors-will-be-paid-upfront-320535-2022-01-27

Beauchamp, T. L., & Bowie, N. E. (2004). Ethical theory and business (7th ed.). Prentice Hall.

Google Scholar  

Benston, G. J., & Hartgraves, A. L. (2002). Enron: What happened and what we can learn from it. Journal of Accounting and Public Policy, 21 (2), 105–127. https://doi.org/10.1016/s0278-4254(02)00042-x

Bhasin, M. L. (2016). Creative accounting practices at Satyam computers limited: A case study of India’s Enron. International Journal of Business and Social Research, 6 (6), 24. https://doi.org/10.18533/ijbsr.v6i6.948

Bhattacharya, S., Murthy, V., & Bhattacharya, S. (2022). The social and ethical issues of online learning during the pandemic and beyond. Asian Journal of Business Ethics, 11 (1), 275–293. https://doi.org/10.1007/s13520-022-00148-z

BloombergQuint. (2019a). PMC Bank fraud: How did they do it? Retrieved 28 July 2022, from https://www.youtube.com/watch?v=PW1ElvXWm0U

BloombergQuint. (2019b). What went wrong: PMC Bank Crisis . Retrieved 28 July 2022, from https://www.youtube.com/watch?v=mXnY-GJfR6g

Bose, S. (2021). COVID-19: The evolution of scams in Asia-Pacific. The Jakarta Post . Retrieved 28 July 2022, from https://www.thejakartapost.com/academia/2021/06/25/covid-19-the-evolution-of-scams-in-asia-pacific.html

Bryant, J. (1980). A model of reserves, bank runs, and deposit insurance. Journal of Banking & Finance, 4 (4), 335–344. https://doi.org/10.1016/0378-4266(80)90012-6

Chuah, K. M., Chen, C. J., & Teh, C. S. (2010). Incorporating Kansei Engineering in instructional design: Designing virtual reality-based learning environments from a novel perspective. Themes in Science and Technology Education, 1 (1), 37–48.

CNBC. (2022). Unity small finance bank says 96% of PMC bank depositors to get paid upfront. Retrieved 28 July 2022, from https://www.cnbctv18.com/finance/unity-small-finance-bank-says-96-of-pmc-bank-depositors-to-get-paid-upfront-12267872.htm

Collins, D., & Kanashiro, P. (2021). Business ethics: Best practices for designing and managing ethical organizations (3rd ed.) .  SAGE Publications.

Cowton, C. (2002). Integrity, responsibility and affinity: Three aspects of ethics in banking. Business Ethics: A European Review, 11 (4), 393–400. https://doi.org/10.1111/1467-8608.00299

Dalal, S., & Sapkale, Y. (2019). PMC Bank: Who is the mysterious auditor Lakdawala & Co? Moneylife . Retrieved 28 July 2022, from https://www.moneylife.in/article/pmc-bank-who-is-the-mysterious-auditor-lakdawala-and-co/58316.html

Dastidar, S. (2016). Sensitivity of bank employees towards professional ethics. International Journal of Applied Research, 2 (10), 304–310. Retrieved from https://www.allresearchjournal.com/archives/2016/vol2issue10/PartE/2-9-42-786.pdf

Dey, P. (2021). Online banking frauds doubled post-Covid, Hyderabad records highest jump. Outlook . Retrieved 28 July 2022, from https://www.outlookindia.com/website/story/business-news-online-banking-frauds-doubled-post-covid-hyderabad-records-highest-jump/404716

Di Carlo, E. (2019). The real entity theory and the primary interest of the firm: Equilibrium theory, stakeholder theory and common good theory. Accountability, Ethics and Sustainability of Organizations  3–21. https://doi.org/10.1007/978-3-030-31193-3_1

Diamond, D., & Dybvig, P. (1983). Bank runs, deposit insurance, and liquidity. Journal of Political Economy, 91 (3), 401–419. https://doi.org/10.1086/261155

ETBFSI. (2021). RBI to directly access banks' system to prevent PMC Bank, DHFL type scams. The Economic Times . Retrieved 28 July 2022, from https://bfsi.economictimes.indiatimes.com/news/banking/rbi-to-directly-access-banks-system-to-prevent-pmc-bank-dhfl-type-scams/87622484

Financial Express. (2022). CBI registers four separate cases of bank fraud; conducts searches. Retrieved 28 July 2022, from https://www.financialexpress.com/india-news/cbi-registers-four-separate-cases-of-bank-fraud-conducts-searches/2400296/

Freeman, R., Phillips, R., & Sisodia, R. (2018). Tensions in stakeholder theory. Business & Society, 59 (2), 213–231. https://doi.org/10.1177/0007650318773750

Gadgil, M. (2019). Rs 2,500-cr exposure to HDIL pulled PMC bank down. MumbaiMirror . Retrieved 28 July 2022, from https://mumbaimirror.indiatimes.com/mumbai/cover-story/rs-2500-cr-exposure-to-hdil-pulled-pmc-down/articleshow/71285290.cms

Gautschi, F. H., & Jones, T. M. (1998). Enhancing the ability of business students to recognize ethical issues: An empirical assessment of the effectiveness of a course in business ethics. Journal of Business Ethics, 17 (2), 205–216. http://www.jstor.org/stable/25073069

Gibson, K. (2000). The moral basis of stakeholder theory. Journal of Business Ethics, 26 , 245–257. https://doi.org/10.1023/A:1006110106408

Gioia, D. (1992). Pinto fires and personal ethics: A script analysis of missed opportunities. Journal of Business Ethics, 11 (5–6), 379–389. https://doi.org/10.1007/bf00870550

González-Ramírez, R., Gascó, J., & Llopis Taverner, J. (2015). Facebook in teaching: Strengths and weaknesses. The International Journal of Information and Learning Technology, 32 (1), 65–78. https://doi.org/10.1108/ijilt-09-2014-0021

Gupta, A. (2021). The devil’s laugh at corporate governance: The case of Punjab and Maharashtra Co-operative Bank (PMC Bank) India. Indian Journal of Corporate Governance, 14 (2), 248–267. https://doi.org/10.1177/09746862211047315

Hafeez, M. (2019). An insider blew the lid off Rs 6,500-crore PMC scam. The Economic Times . Retrieved 28 July 2022, from https://economictimes.indiatimes.com/industry/banking/finance/banking/an-insider-blew-the-lid-off-rs-6500-crore-pmc-scam/articleshow/72989524.cms

Hafsal, K., Suvvari, A., & Durai, S. (2020). Efficiency of Indian banks with non-performing assets: Evidence from two-stage network DEA. Future Business Journal, 6 (1). https://doi.org/10.1186/s43093-020-00030-z

Hakim, S. (2019). PMC Scam: Only 25 in the bank knew about HDIL accounts; each. MumbaiMirror . Retrieved 28 July 2022, from https://mumbaimirror.indiatimes.com/mumbai/cover-story/only-25-in-pmc-knew-about-hdil-accounts/articleshow/72134434.cms

Halinen, A., & Jokela P. (2016) Exploring ethics in business networks: Propositions for future research. In P. Thilenius, C. Pahlberg, V. Havila (Eds.),  Extending the Business Network Approach . Palgrave Macmillan. https://doi.org/10.1057/978-1-137-53765-2_19

Harris, J., & Bromiley, P. (2007). Incentives to cheat: The influence of executive compensation and firm performance on financial misrepresentation. Organization Science, 18 (3), 350–367. https://doi.org/10.1287/orsc.1060.0241

Harrison, J., Felps, W., & Jones, T. (2019). Instrumental stakeholder theory makes ethically based relationship building palatable to managers focused on the bottom line. Academy of Management Review, 44 (3), 698–700. https://doi.org/10.5465/amr.2018.0442

Herzog, L. (2017). Professional ethics in banking and the logic of “Integrated Situations”: Aligning responsibilities, recognition, and incentives. Journal of Business Ethics, 156 (2), 531–543. https://doi.org/10.1007/s10551-017-3562-y

Jayadev, M., & Padma, N. (2020). Wilful defaulters of Indian banks: A first cut analysis. IIMB Management Review, 32 (2), 129–142. https://doi.org/10.1016/j.iimb.2019.10.005

Jeon, S. H., & Kwon, M. (2020). Ethical work environment and career decisions: Is this relationship moderated by a position of power? Ethics & Behavior, 31 (8), 557–574. https://doi.org/10.1080/10508422.2020.1822844

Jones, T., Harrison, J., & Felps, W. (2018). How applying instrumental stakeholder theory can provide sustainable competitive advantage. Academy of Management Review, 43 (3), 371–391. https://doi.org/10.5465/amr.2016.0111

Kang, M. (2020). Demand deposit contracts and bank runs with present biased preferences. Journal of Banking & Finance, 119 , 105901. https://doi.org/10.1016/j.jbankfin.2020.105901

Karthik, H. (2021). People vs. banks: Will the common man benefit as the transparency fight enters the last leg? The Economic Times . Retrieved from https://economictimes.indiatimes.com/prime/fintech-and-bfsi/people-vs-banks-will-the-common-man-benefit-as-the-transparency-fight-enters-the-last-leg/primearticleshow/86787645.cms

Kaul, V. (2020). Bad money: Inside the NPA mess and how it threatens the Indian banking system . HarperCollins.

Khatri, P. (2022). Anand Mahindra addresses farmer's humiliation at dealership: Mahindra CEO responds. Retrieved 28 July 2022, from https://www.cartoq.com/anand-mahindra-addresses-farmers-humiliation-at-dealership-mahindra-ceo-responds/

Klein, G. (2007). Performing a project premortem. Harvard Business Review, 85 (9), 18–19.

Kour, M. (2020). Ethics and ethical practices in banks: A review of literature. International Journal of Business Ethics in Developing Economies, 9 (2), 27–32. Retrieved from https://www.proquest.com/openview/c331b8eedfdbd76d8f90de6f26ebdec9/1?pq-origsite=gscholar&cbl=2030940

KPMG. (2022). COVID-19 frauds and scams: How to protect yourself. Retrieved 28 July 2022, from https://assets.kpmg/content/dam/kpmg/in/pdf/2020/03/forensic-covid-19-frauds-and-scams.pdf

Kumar, N. (2021). Bank depositors to get up to Rs 5 lakh refund within 90 days under DICGC insurance. The Economic Times . Retrieved from https://economictimes.indiatimes.com/wealth/save/depositors-to-get-upto-rs-5-lakh-from-dicgc-within-90-days-if-bank-fails-cabinet-clears-amendment/articleshow/84824441.cms?from=mdr

Liu, X. (2010). Predatory short-selling and self-fulfilling crises: When Morris-Shin Meets Diamond-Dybvig. SSRN Electronic Journal . https://doi.org/10.2139/ssrn.1780240

Mahmud, A., Ding, D., & Hasan, M. M. (2021). Corporate social responsibility: Business responses to coronavirus (COVID-19) pandemic. SAGE Open, 11 (1), 215824402098871. https://doi.org/10.1177/2158244020988710

McKenzie, R., & Machan, T. (2003). Will MBA courses in ethics prevent corporate scandals? Investor’s Business Daily, p. A14, as cited in Reynolds, S. J. (2006). A neurocognitive model of the ethical decision-making process: Implications for study and practice. Journal of Applied Psychology, 91 (4), 737-748. https://doi.org/10.1037/0021-9010.91.4.737

Meisel, J. (2008). The ethics of observing: Confronting the harm of experiential learning. Teaching Sociology, 36 (3), 196–210. https://doi.org/10.1177/0092055x0803600301

Mohan, R. (2022). Covid-19 pandemic a trigger for bank scam epidemic. The Strait Times . Retrieved from https://www.straitstimes.com/asia/covid-19-pandemic-a-trigger-for-bank-scam-epidemic

Motiani, P. (2021). By November 30, depositors of moratorium banks will get up to Rs 5 lakh: Here’s how. The Economic Times . Retrieved from https://economictimes.indiatimes.com/wealth/save/moratorium-banks-depositors-set-to-get-up-to-rs-5-lakh-back-by-nov-30/articleshow/85760583.cms

Mukherjee, A. (2019). PMC crisis: This tiny bank in Maharashtra is a canary in India’s coalmine. The Economic Times . Retrieved from https://economictimes.indiatimes.com/industry/banking/finance/banking/pmc-crisis-this-tiny-bank-in-maharashtra-is-a-canary-in-indias-coalmine/articleshow/71373106.cms

Murthy, N., & Gopalkrishnan, S. (2022). Creating a Nexus between dark triad personalities, non-performing assets, corporate governance and frauds in the Indian Banking sector. Journal of Financial Crime , (ahead-of-print). https://doi.org/10.1108/JFC-05-2022-0097

Nayak, G. (2020). PMC impact? Your deposits get 5 times more cover. The Economic Times . Retrieved from https://economictimes.indiatimes.com/industry/banking/finance/banking/pmc-impact-your-deposits-get-5-times-more-cover/articleshow/73861529.cms

Nayak, S., Behl, A., & Behl, A. (2018). Deposit insurance: Pre-emptive expediency against bank runs or propulsion of moral hazard? Economic and political implications in India. In A. Behl & S. Nayak (Eds.), Maintaining financial stability in times of risk and uncertainty (pp. 1–29). IGI Global. https://doi.org/10.4018/978-1-5225-7208-4.ch001

Okpo, O. (2020). Nigeria’s traditional virtue ethics and business: An ibibio virtue ethics approach to business ethics. GNOSI: An Interdisciplinary Journal of Human Theory and Praxis, 3 (1), 16–31. Retrieved from http://gnosijournal.com/index.php/gnosi/article/view/22

Osibanjo, A. O., Akinbode, J., Falola, H. O., & Oludayo, O. O. (2018). Work ethics and employees’ job performance. Journal of Leadership, Accountability and Ethics, 12 (1), 107–117.

Ozarkar, V. (2019). Waryam Singh ‘bridge’ between bank & HDIL. MumbaiMirror . Retrieved 28 July 2022, from https://mumbaimirror.indiatimes.com/mumbai/other/waryam-singh-bridge-between-bank-hdil/articleshow/71471424.cms

Panda, S., & Lele, A. (2021). Centrum gets RBI's in-principle nod to take over PMC Bank via SFB route. Business Standard . Retrieved from https://www.business-standard.com/article/finance/rbi-s-in-principle-approval-to-centrum-financial-services-to-set-up-sfb-121061801050_1.html

Pandey, S., Sharma, P., & Jain, R. (2019). Ethics in Indian banking industry: Issues and challenges. In International Conference on Ethics and Integrity in Management and Legal Practices . Haryana, India. Retrieved from https://www.indusedu.org/pdfs/IJREISS/IJREISS_3183_88570.pdf

Patil, S. (2021). Securing India in the Cyber Era (1st ed.). Routledge.

Book   Google Scholar  

Pfeffer, J. (2003). Teaching the wrong lesson. Business, 2 (4), 60.

PMC Bank. (2019). Punjab & Maharashtra Co-op Bank Ltd. recasted balance sheet as at March 31, 2019. Retrieved 30 January 2022, from https://www.pmcbank.com/documents/Recast-balance-sheet-2018-19.pdf

PMC Bank. (2021). Punjab & Maharashtra Co-operative Bank Ltd-About Us. Pmcbank.com. Retrieved 30 January 2022, from https://www.pmcbank.com/english/AboutUs.aspx .

Qayyum, A., Zahid, N., & Jamil, R. A. (2019). The impact of HR practices on employees’ performance: An imperative role of Islamic work ethics. Journal of Islamic Business and Management, 9 (2). https://doi.org/10.26501/jibm/2019.0902-010

Rajput, R., & Vyas, M. (2019). PMC Bank probe finds another ghost account operator. The Economic Times . Retrieved from https://economictimes.indiatimes.com/industry/banking/finance/banking/pmc-bank-probe-finds-another-ghost-account-operator/articleshow/72192978.cms

RBI. (2019). Directions under Section 35A of the Banking Regulation Act, 1949 (AACS) – Punjab and Maharashtra Cooperative Bank Limited, Mumbai, Maharashtra - Relaxation in withdrawal limit of Deposit Accounts. Retrieved 30 January 2022, from https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=48243

RBI. (2020). Deposit Insurance and Credit Guarantee Corporation (DICGC) increases the insurance coverage for depositors in all insured banks to ₹ 5 lakh. Retrieved 30 January 2022, from https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=49330

Rebello, J. (2020). Scam-hit PMC Bank invites EoI from potential investors for reconstruction. The Economic Times . Retrieved 30 January 2022, from https://economictimes.indiatimes.com/industry/banking/finance/banking/scam-hit-pmc-bank-invites-eoi-from-potential-investors-for-reconstruction/articleshow/79020780.cms

Reinstein, A., & McMillan, J. (2004). The Enron debacle: More than a perfect storm. Critical Perspectives on Accounting, 15 (6–7), 955–970. https://doi.org/10.1016/j.cpa.2003.08.006

Rest, J. R. (1979). Development in judging moral issues . University of Minnesota Press.

Rest, J. R. (1986). Moral development: Advances in research and theory . Praeger.

Reynolds, S. J. (2006). A neurocognitive model of the ethical decision-making process: Implications for study and practice. Journal of Applied Psychology, 91 (4), 737–748. https://doi.org/10.1037/0021-9010.91.4.737

Santos, T., & Nakane, M. (2021). Dynamic bank runs: An agent-based approach. Journal of Economic Interaction and Coordination, 16 (3), 675–703. https://doi.org/10.1007/s11403-021-00325-6

Schultz, D., & Harutyunyan, K. (2015). Combating corruption: The development of whistleblowing laws in the United States, Europe, and Armenia. International Comparative Jurisprudence, 1 (2), 87–97. https://doi.org/10.1016/j.icj.2015.12.005

Seetharaman, G. (2019). The biggest lessons for India from the PMC Bank fiasco. The Economic Times . Retrieved from https://economictimes.indiatimes.com/industry/banking/finance/banking/the-biggest-lessons-for-india-from-the-pmc-bank-fiasco/articleshow/71557920.cms

Sengupta, A. (2022). Top bank frauds that grabbed headlines in FY22. ETBFSI. Retrieved from https://bfsi.economictimes.indiatimes.com/news/banking/top-bank-frauds-that-grabbed-headlines-in-fy22/90545177

Sharma, N., & Sharma, D. (2018). Rising toll of frauds in banking: A threat for the Indian Economy. Journal of Technology Management for Growing Economies, 9 (1), 71–88. https://doi.org/10.15415/jtmge.2018.91003

Sholihin, M., Sari, R. C., Yuniarti, N., & Ilyana, S. (2020). A new way of teaching business ethics: The evaluation of virtual reality-based learning media. The International Journal of Management Education, 18 (3), 100428. https://doi.org/10.1016/j.ijme.2020.100428

Sims, R. R. (2002). Teaching business ethics for effective learning . Quorum Books.

Singh, U. (2015). Role of deposit insurance in protecting the economy of India. International Journal in Management & Social Science, 3 (1), 173–182.

Singh, A. (2021). RBI extends restrictions on PMC Bank till March 31, 2022. NDTV Profit . Retrieved from https://www.ndtv.com/business/rbi-extends-restrictions-on-pmc-bank-for-3-months-till-march-2022-2676651

Sood, P., & Bhushan, P. (2020). A structured review and theme analysis of financial frauds in the banking industry. Asian Journal of Business Ethics, 9 (2), 305–321. https://doi.org/10.1007/s13520-020-00111-w

Sorkin, A., & Berenson, A. (2002). Corporate conduct: The overview; Tyco admits using accounting tricks to inflate earnings. Retrieved 30 January 2022, from https://www.nytimes.com/2002/12/31/business/corporate-conduct-overview-tyco-admits-using-accounting-tricks-inflate-earnings.html

Sroka, W., & Szántó, R. (2018). Corporate social responsibility and business ethics in controversial sectors: Analysis of research results. Journal of Entrepreneurship, Management and Innovation, 14 (3), 111–126. https://doi.org/10.7341/20181435

Statista. (2021). India: number of bank fraud cases 2021. Retrieved 15 September 2021, from https://www.statista.com/statistics/1012729/india-number-of-bank-fraud-cases/

Stenmark, C., Riley, K., & Kreitler, C. (2019). Ethical decision-making interrupted: Can cognitive tools improve decision-making following an interruption? Ethics & Behavior, 30 (8), 557–580. https://doi.org/10.1080/10508422.2019.1683012

Stenmark, C., Redfearn, R., & Kreitler, C. (2020). Self-efficacy and ethical decision-making. Ethics & Behavior, 31 (5), 301–320. https://doi.org/10.1080/10508422.2020.1776617

Taplin, I. M. (2014). Who is to blame? Critical Perspectives on International Business, 10 (1/2), 72–83. https://doi.org/10.1108/cpoib-09-2013-0035

The Economic Times. (2020). UCBs asked to report exposures above Rs 5 crore . Retrieved 28 July 2022, from https://economictimes.indiatimes.com/industry/banking/finance/banking/ucbs-asked-to-report-exposures-above-rs-5-crore/articleshow/73319978.cms

The Economic Times. (2021). RBI details draft amalgamation plan for PMC Bank . Retrieved 28 July 2022, from https://economictimes.indiatimes.com/industry/banking/finance/pmc-bank-in-focus-rbi-announces-draft-scheme-of-amalgamation/articleshow/87848810.cms

Tosun, P. (2020). Unethical sales practices in retail banking. International Journal of Bank Marketing, 38 (6), 1305–1327. https://doi.org/10.1108/ijbm-02-2020-0074

Valentine, S. R., Hanson, S. K., & Fleischman, G. M. (2018). The presence of ethics codes and employees’ internal locus of control, social aversion/Malevolence, and ethical judgment of incivility: A study of smaller organizations. Journal of Business Ethics, 160 (3), 657–674. https://doi.org/10.1007/s10551-018-3880-8

Wang, Y., & Kleiner, B. (2005). Defining employee dishonesty. Management Research News, 28 (2/3), 11–22. https://doi.org/10.1108/01409170510785057

Weiss, J. W. (2021). Business ethics: A stakeholder and issues management approach (6th ed.). Berrett-Koehler Publishers.

Weitzner, D., & Deutsch, Y. (2019). Why the time has come to retire instrumental stakeholder theory. Academy of Management Review, 44 (3), 694–698. https://doi.org/10.5465/amr.2018.0342

Yin, R. K. (2017). Case study research and applications: Design and methods . SAGE Publications.

Zhong, N., Wang, S., & Yang, R. (2015). Does corporate governance enhance common interests of shareholders and primary stakeholders? Journal of Business Ethics, 141 (2), 411–431. https://doi.org/10.1007/s10551-015-2702-5

Download references

Author information

Authors and affiliations.

Symbiosis School of Economics, Faculty of Humanities and Social Sciences, Symbiosis International (Deemed University), Pune, Maharashtra, 412115, India

Sushma Nayak & Jyoti Chandiramani

You can also search for this author in PubMed   Google Scholar

Corresponding author

Correspondence to Jyoti Chandiramani .

Ethics declarations

Relevant dataset citations in the reference list are provided and verified.

Conflict of interest

The authors declare no competing interests.

Additional information

Publisher's note.

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Teaching notes

This study explores the importance of business ethics, information sharing and transparency to build an information-driven society by scouting the case of Punjab and Maharashtra Co-operative (PMC) Bank, India, which defaulted on payments to its depositors and was placed under Reserve Bank of India’s directions due to a massive fraud perpetrated by bank officials. The crisis worsened when uninformed and panic-stricken investors advanced their narrative through fake news peddled via social media channels, resulting in alarm that caused deaths of numerous depositors. It exposed several loopholes in information management in India’s deposit insurance system and steered the policy makers to restructure the same, thus driving the country consistent with its emerging market peers. The study further identifies best practices for aligning employees towards ethical behaviour in a virtual workplace and the pedagogical approaches for information management in the new normal.

Target Audience

Educators in the field of banking, business ethics, corporate governance and organizational behaviour; practitioners; various stakeholders of banks; and policy makers.

Learning Objectives

[1] To offer practical suggestions for creating an environment conducive to ethical learning;

[2] To explore the importance of business ethics, information sharing and transparency for building an information-driven society;

[3] To identify best practices for aligning employees toward ethical behaviour in a virtual workplace, and assessing them;

[4] To identify pedagogical approaches for information management and ethics education in the new normal.

Questions for Discussion

[1] What is the overall problem presented in this case?

Answer. The case explores the importance of business ethics, information sharing and transparency to build an information-driven society by scouting the case of Punjab and Maharashtra Co-operative (PMC) Bank, India, which defaulted on payments to its depositors and was placed under Reserve Bank of India’s (RBI) directions due to a massive fraud perpetrated by bank officials.

[2] What are the factors affecting the problem(s) related to this case?

Answer. The case investigates the changing paradigm of business ethics in a dynamic world that is gradually shifting towards virtual technology in the milieu of the global pandemic.

[3] How can an organization align employees in a virtual workplace?

Answer. Organizations must offer fresh prototypes for new ethical circumstances as they arise, and employees must be exposed to such prototypes on a frequent basis. As a case in point, there is growing consensus on previously uncharted ethical territory such as inspection of electronic mail, staff supervision, and genetic screening; employees can consolidate them into their decision-making based on the extent to which organizations impart these norms consistently.

[4] What are the objectives of project premortem?

Answer. The objectives of project premortem are to assess the viability of a project at the start of a project itself, allowing it to be enhanced rather than autopsied.

[5] What are the challenges in the virtual work environment that educators have been facing in the new normal?

Answer. During the pandemic, not only the students, but also the educators began a new era of learning. For educators who had been accustomed to textbook teaching, the enormous technological innovation in the education sector has been both demanding and novel. To make their online classes seamless and compelling, they had to learn far more than their students. During the online classes, educators had to push students to be more engaged and active. They made certain that the lessons were fresh and original enough for pupils to follow and grow from them. Teachers led interactive sessions to ensure that every student in the class was involved. Instead of remaining at home and keeping their beliefs to themselves, they were encouraged to express their views and have healthy discussions. Both students and educators went above and beyond to make online learning a rewarding experience. As a result, the educational sessions turned out participatory and therapeutic in nature.

List of Additional Sources.

Albaum, G. (2014). Business-related ethical values of future business leaders in four Asia-Pacific countries. Asian Journal of Business Ethics, 3 (2), 127-140. https://doi.org/10.1007/s13520-014-0036-5 .

Boylan, M. (2014). Business ethics . Chichester, U.K.: Wiley Blackwell.

Grace, D., & Cohen, S. (1995). Business ethics . Australia: Oxford University Press.

Gupta, A. D. (2016). Ethics, profession, and rational choice. Asian Journal of Business Ethics, 5 (1-2), 53-60. https://doi.org/10.1007/s13520-016-0054-6 .

Lütge, C., & Uhl, M. (2021). An economically informed approach to business ethics. Business Ethics, 1-2. https://doi.org/10.1093/oso/9780198864776.003.0001 .

Lütge, C., & Uhl, M. (2021). Problem areas of business ethics. Business Ethics, 156-194. https://doi.org/10.1093/oso/9780198864776.003.0006 .

McManus Warnell, J., & Umeda, T. (2019). Perspectives on Business Ethics in the Japanese tradition: Implications for global understanding of the role of business in society. Asian Journal of Business Ethics, 8 (1), 25-51. https://doi.org/10.1007/s13520-019-00087-2 .

Moriarty, J. (2021). Business, ethics, and Business Ethics. Business Ethics, 1-19. https://doi.org/10.4324/9781351016872-1 .

Rossouw, D., & Vuuren, V. L. (2018). Business ethics . Cape Town: Oxford University Press.

Saini, D., & Sengupta, S. S. (2016). Responsibility, ethics, and leadership: An Indian study. Asian Journal of Business Ethics, 5 (1-2), 97-109. https://doi.org/10.1007/s13520-016-0058-2 .

Varma, S. (2019). Why learn business ethics? —students’ conceptions of the use and exchange value of applied business ethics. Asian Journal of Business Ethics, 8 (1), 107-125. https://doi.org/10.1007/s13520-019-00090-7 .

Venkatadurai, J., Dhyani, U., & Sharma, M. (2013). Ethics and morality beyond normative theories. Asian Journal of Business Ethics, 3 (1), 35-39. https://doi.org/10.1007/s13520-013-0029-9 .

Rights and permissions

Springer Nature or its licensor holds exclusive rights to this article under a publishing agreement with the author(s) or other rightsholder(s); author self-archiving of the accepted manuscript version of this article is solely governed by the terms of such publishing agreement and applicable law.

Reprints and permissions

About this article

Nayak, S., Chandiramani, J. A crisis that changed the banking scenario in India: exploring the role of ethics in business. Asian J Bus Ethics 11 (Suppl 1), 7–32 (2022). https://doi.org/10.1007/s13520-022-00151-4

Download citation

Received : 01 February 2022

Accepted : 03 August 2022

Published : 28 August 2022

Issue Date : December 2022

DOI : https://doi.org/10.1007/s13520-022-00151-4

Share this article

Anyone you share the following link with will be able to read this content:

Sorry, a shareable link is not currently available for this article.

Provided by the Springer Nature SharedIt content-sharing initiative

• Deposit insurance
• Find a journal
• Publish with us
• Track your research

• WHAT IS CSR?
• About The CSR Journal
• Contributors
• Testimonials
• MEMBERSHIP & ADVERTISING
• Education And Skill Training
• Environment
• Women & Child Welfare
• Business Ethics & Philanthropy
• Leaders Speak
• Fund The Project
• Image Gallery
• BECOME A MEMBER

• Top Stories

Biggest Corporate Governance Failures in India

Many small businesses in india have been hit hard by the global pandemic. msmes are unsure if they can survive the multiple crises that keep on coming. covid-19 has brought with it an increased risk of corruption not only in the public health sector but also in the private sector. corporate governance failures have resulted in flashy business tycoons vijay mallya and lalit modi absconding from india and the arrest of corporate heavyweights like rana kapoor, chanda kochhar and the singh brothers., recovering to a business environment of fairness and integrity won’t be possible without standing #unitedagainstcorruption. the holy grail of corporate governance is not infallible. investors have found this out the hard way when massive corporations like jet airways, dhfl, yes bank, il&fs, kingfisher airlines collapsed. gst and the insolvency law have been blamed, yet failure to comply with corporate governance rules and not sticking to legislation cannot be ruled out as the reasons., corrupt business practices, corporate takeovers and mergers call for capital restructuring, which is a prime time for corruption. if there is no independent director on the board, there is a chance that members might not comply strictly with the laws. the company’s takeover could be driven by a board member having vested interests in the acquisition. rather than maximising value for the shareholders, such a move would defeat the purpose of the whole exercise and that person in question would pocket the gains., some companies have been known to meddle with the account books, showing book profits that haven’t yet translated into cash. this is misleading for auditors and other parties looking at the account books of the organisation., corporate governance failures in india, here’s a look at how corrupt business practices led to some of the biggest corporate governance failures in india., tata-mistry fallout, cyrus mistry was a director of tata sons ltd. since 2006. the majority of shareholding was held by trusts of the tata family. this was to ensure that the control remains with the family even when cyrus mistry joined. the board frequently disagreed with the decisions of mistry and ousted him during one such meeting. mistry alleged that there was dominant control by the nominee directors of the trust, including ratan tata, who were the “shadow directors” of tata sons ltd., mistry said that he was never provided with a free hand by the promoters to manage the company and that the promoters were stubborn regarding their own projects. he also alleged that there was no independence in the working of the independent directors. nusli wadia, who was an independent director was also fired for standing up for cyrus mistry to maintain his chairmanship in group companies. this shows the clear abuse of power by the promoters., icici bank-videocon bribery case, the enforcement directorate had apprehended deepak kochhar in september 2020 after it filed a criminal case for money laundering basis an fir registered by the central bureau of investigation (cbi) against the kochhars, videocon’s dhoot, and others., the federal probe agency alleged that rs. 64 crore out of a loan amount of rs. 300 crore sanctioned by a panel of icici bank headed by chanda kochhar (wife of deepak kochhar) to videocon international electronics limited was wired to nupower renewables pvt ltd (nrpl) by videocon industries on september 8, 2009. the money was transferred a day after the disbursement of the loan. nrpl, earlier known as nupower renewables limited (nrl), is owned by deepak kochhar., pnb-nirav modi scam, the punjab national bank (pnb), one of the country’s largest public-sector lenders, found itself in the middle of a rs. 11,400 crore transaction fraud case in february 2018. the bank had detected and informed the bombay stock exchange about some “fraudulent and unauthorised transactions” in one of its branches in mumbai to the tune of $1771.69 million (approx). the cbi then received two complaints from pnb against billionaire diamantaire nirav modi and a jewellery company alleging fraudulent transactions worth about rs. 11,400 crore. this was in addition to the rs. 280 crore fraud case that nirav modi was already under investigation for, again filed by pnb. modi is facing two sets of criminal proceedings. the central bureau of investigation case relates to the large-scale fraud upon pnb through the fraudulent obtaining of “letters of understanding”, while the enforcement directorate is investigating the laundering of the proceeds of that fraud., the satyam scandal, satyam was a public-listed company and ironically enjoying a good reputation, even winning the golden peacock global award for corporate governance at one point. however, the company colluded with auditors in fraudulent accounting practices to mislead the investors, regulators, board and other stakeholders. the scandal was unravelled when the company’s chairman ramalinga raju confessed about the misrepresentation in the accounting practices and thereafter regulators like sebi stepped in and started taking action., the issue started with satyam’s attempt to invest rs. 7,000 crores in maytas properties and maytas infrastructure. these firms were owned by the family members of raju. the investments were cleared by the board on 16th december 2008 but were opposed by the investors. the accounts of the firm were manipulated by assets like cash and bank deposits being overstated, debts being understated. as a result, the investors filed various lawsuits against satyam., following the maytas deal and subsequent lawsuits, the decision of satyam board was reversed. the world bank banned satyam for 8 years to conduct any kind of business while four independent directors resigned., the satyam case sparked a reaction from various corners of corporate india, calling for urgent change in policy measures. several agencies like cii (confederation of indian industries), national association of software and services committee, sebi committee on disclosure and accounting standards etc. started looking into the policy changes regarding the audit committee, shareholder rights, whistle-blower policy etc. these committees prepared various kinds of suggestions which were later dealt with by the legislature., malvinder and shivinder singh, the now infamous singh brothers shivinder and malvinder, who were under the scanner of the economic offence wing (eow) of the delhi police for a fraudulent loan from laxmi vilas bank, are accused of siphoning nearly $2 billion from their corporate empire that spanned across listed companies including pharma major ranbaxy, hospital chain fortis healthcare and financial services company religare enterprises ltd (rel)., malvinder and shivinder have been accused of diverting the money of religare finvest limited (rfl), an rel subsidiary. the broad allegations are that malvinder and shivinder, along with other officials of rel, took loans in the name of rfl and diverted the money to other companies. this caused the company losses of rs. 2,387 crore these allegations against malvinder and shivinder singh are just the tip of the iceberg. according to a business today report from 2018, the brothers inexplicably managed to squander a whopping rs. 22,500 crore over just one decade., in a complaint malvinder accused his younger brother, shivinder, the dhillon family and sunil godhwani (former head of rel) of criminal conspiracy, cheating and fraud for allegedly siphoning off thousands of crores from rhc holdings, the group’s holding company that once promoted fortis hospitals and religare. meanwhile, sebi has accused the singh brothers of diverting rs. 403 crores from fortis healthcare to rhc., dewan housing finance limited (dhfl), the dhfl scandal was the biggest corporate fraud of 2019, and is still under investigation. it is a classic case of meddling with the books – that we mentioned earlier – getting the company into trouble.  in this case, the “bandra books” were at the centre of the massive corporate fraud which is still under investigation. the supposed bandra branch for which a parallel set of books exist, does not exist in reality. it was a completely made up entity for the corrupt business practices to thrive., a forensic report declared: “out of the rs. 23,815 crores shown as disbursed to bandra book entities in the accounts of the company, only rs. 11,755.79 crores was actually disbursed” to 91 entities, but was portrayed as comprising 2,60,315 home loan accounts. in fact, when the auditor “verified some of these “91 entities”, it was found that 34 of them had invested part of the loan amount back into companies linked with dhfl. according to sebi, if the fake income in the bandra books is taken out, dhfl has been making losses for years on end. the fraud has allowed dhfl to raise a whipping rs. 24,000 crores through public issue of debt securities., in the absence of a credible revival plan, and in the interest of yes bank’s depositors, the rbi (reserve bank of india) took control of yes bank in march 2020. the story of yes bank is nothing short of a john grisham novel. it was founded as an nbfc (non-bank financial company) in 1999, and became a full-fledged bank in 2003. its board members battled constantly for the top spot, with former managing director and ceo rana kapoor being popular for propping up the market by agreeing to disburse loans to corporate borrowers rejected by other banks. the bank would charge a huge upfront fee and most borrowers were defaulters at will., the financial position of yes bank has undergone a steady decline largely due to inability of the bank to raise capital to address potential loan losses and resultant downgrades, triggering invocation of bond covenants by investors, and withdrawal of deposits. the bank has also experienced serious governance issues and practices in recent years which have led to its steady decline. the rbi was in constant engagement with the bank’s management to find ways to strengthen its balance sheet and liquidity. the bank management had indicated to the rbi that it was in talks with various investors and they were likely to be successful., rbi was also engaged with a few private equity firms for exploring opportunities to infuse capital as per the filing in stock exchange dated february 12, 2020. these investors did hold discussions with senior officials of rbi but for various reasons eventually did not infuse any capital. since a bank and market-led revival is a preferred option over a regulatory restructuring, the rbi made all efforts to facilitate such a process and gave adequate opportunity to yes bank’s management to draw up a credible revival plan, which did not materialise. in the meantime, the bank was facing regular outflow of liquidity. it wasn’t long before the bank collapsed and rbi was forced to apply to the central government for imposing a moratorium on yes bank., cafe coffee day, the coffee chain cafe coffee day (which loyalists called ccd) had over 1750 outlets across the nation at one point in time. it was india’s biggest coffee chain in the 2000s. proprieter v. siddhartha came from a prestigious family with a 140-year history of growing coffee beans. a chat with a german coffee maker inspired him to launch cafe coffee day as a rival to starbucks right when the cafe culture had begun to brew among young people. the chain went public in 2015 and it looked like things could only get better, what with rumours of coca cola planning to invest a whopping 2,500 crores into the company., however, things took a turn in september 2017 when the income tax (i-t) department conducted raids at over 20 locations linked to siddhartha. he was reportedly heavily in debt. his coffee day enterprises ltd had seen net loss widening to rs. 67.71 crore in the fiscal year ended march 31, 2018 from rs. 22.28 crore loss in the previous year. this despite revenues climbing to 122.32 crores. he disappeared suddenly one evening in 2019., a letter by him to the ccd board claimed that he was being pressured by “one of the private equity partners” forcing him to buy back shares, a transaction he had partially completed six months ago by borrowing a large sum of money from “a friend”. his dead body was found 36 hours after he went missing in mangaluru. it was apparently a case of suicide., evidence points to siddhartha having taken on debt in his private capacity to buy land and invest in long gestation projects, and angry lenders hounding him for quick returns. while the 2000s decade saw the rise of cafe coffee day, the period also saw debt piling up. the company needed funds for both operations and capex. in 2010, standard chartered private equity (mauritius) ii ltd, kkr mauritius pe investments ii ltd, and arduino holdings ltd (which later transferred the debentures to nls mauritius llc) invested close to $149 million. compulsorily convertible preference shares held by standard chartered private equity (mauritius) ii ltd and the compulsory convertible debenture held by kkr mauritius pe investments ii ltd and nls mauritius llc was converted into equity shares at the time of listing. by june 2015, the consolidated debt was a whopping rs. 2,700 crore, a knot the board couldn’t wriggle out of., jet airways, jet airways was india’s second largest airline until the year 2018 with 13.8% market share. it saw its last flight on 18th april 2019 after running out of funds to carry out operations and left more than 15,000 employees in the lurch. the company’s dues to banks are around rs. 8,500 crores. jet airways owes another rs. 25,000 crores in arrears to lessors, employees and other firms. corporate governance failures by its chairman naresh goyal are the culprits. the downfall of jet airways follows a string of other failed airlines including kingfisher, sahara and deccan, pointing to bad corporate governance in the airline sector., the goyal family owned the majority share in the airline and naresh goyal was the chairman of the board. a promoter-led board is often at the danger of creating a spineless board, often serving at the wish and command of the promoter-chairman. two independent directors, vikram mehta singh and ranjan mathai, resigned from the board in november 2018. the decision by the board to not accept an investment offer by the tata group was financially imprudent as a deal would have infused capital and saved the airline. it also looks as though the decision was made with the sole interest of the promoter than the consideration of the stakeholders as well as the employees., international anti-corruption day 2020 is another chance for india inc to pledge being united against corruption., related articles more from author.

YES BANK rated ‘A-’ Leadership Band by CDP for its 2023 Climate Change disclosures

Measuring outcomes of CSR programmes

Scaling innovation in clean drinking water for rural India

ऐसे करें अपने गांव का विकास, बनायें अपने गांव को मॉडल विलेज

अब यूपी के बांदा में भी होने लगा सीएसआर, 22 लाख खर्च

ऐन भीषण गर्मी में बंद पड़ा सीएसआर से मिला आरओ वाटर प्लांट

Editor's pick.

Central Crime Branch arrests five in fake CSR funds scam in Bengaluru

Election Report Card: Promises vs Achievements under ‘Nation First’

Government implements Citizenship (Amendment) Act, what is CAA and why is it facing criticism

POPULAR CATEGORY

• Press Release 3197
• Top Stories 1604
• Header News 1552
• Environment 1309
• Business Ethics & Philanthropy 1076
• Health & Sanitation 1053
• Education and Skill Training 822

EXCLUSIVE SUMMIT OFFER Join foundr+ and get Ecommerce Kickstarter program free!

• Skip to primary navigation
• Skip to main content

A magazine for young entrepreneurs

The best advice in entrepreneurship

Subscribe for exclusive access, what these 4 startup case studies can teach you about failure.

Written by Jonathan Chan | December 6, 2020

Comments -->

Get real-time frameworks, tools, and inspiration to start and build your business. Subscribe here

Failure hurts.

Watching something you’ve poured endless amounts of time and energy in, only to see it crumble before you will hurt like hell. It’ll be like a physical punch to the gut, and it will paralyze you. It’s no wonder that entrepreneurs avoid failure like the plague.

A startup can go under for a variety of reasons. While founders can stand around and point fingers at each other, attribute it to forces outside of their control, or just blame bad luck. The reality is that startup failure is from a refusal to acknowledge problems until the ship is already sinking.

The reality of the situation is you are more likely to fail than you are to succeed. If you’re defining startup failure as the inability to deliver on the projected return of investment, then 95% of startups are failures.

But there is no greater teacher than failure.

If you’re going to be an entrepreneur then you better get used to failing, it will become an inevitable part of your life. Don’t run from it, embrace it, and see what lessons you can learn from it.

By analyzing the post-mortems of various failed startups here are the expected and not-so-expected reasons why they failed and what you can learn from their mistakes. Watch out for those icebergs.

Be Wary of the Pivot

Fab was once known as ‘ the world’s fastest-growing startup ’ and was valued at over at $1 billion before it ultimately crashed.

Fab underwent a variety of changes from an LGBT social network, to a daily flash sales site, to ‘the world’s design store’, before finally being sold off to PCH, for a reported $15 million in cash and stock .

Fab is both a success story and a cautionary tale to entrepreneurs about the risks of pivoting. A pivot generally means that a business is looking to find a fresh perspective and vision to prevent itself from growing stagnant.

Hypothetically a startup should constantly be evaluating data: measuring the market, contemplating new strategies, testing new products. A pivot allows a business to forge ahead in a new direction when either the opportunity is clear, or the current strategy is failing.

“Once we made the decision to pivot, we committed to doing one thing and doing it well. No distractions.” – Jason Goldberg, cofounder and CEO of Fab.

Fab was originally known as Fabulis an LGBT social networking site before pivoting wonderfully into a daily flash sales site for independent artists. Cofounders Jason Goldberg and Bradford Shellhammer admitted to themselves that Fabulis wasn’t turning out to be the success that they hoped, being stuck at 150,000 users for the last few months. It was time to pivot.

The data they had gathered from Fabulis illuminated a real hole in the design market. People were looking for an easy and accessible way to purchase unique and interesting designerwear.

So, they pivoted and became a daily flash sales site for designer housewares, accessories, clothing, and jewelry. The move paid off with Fab growing to over 10 million users and reportedly generating more than $200,000 every day.

Two years later after the initial pivot, despite a shaky business model, Fab decided to pivot again. This time looking to become a designer alternative to Amazon and IKEA. Coupled with a failed attempt to expand into the European market, Fab began its spectacular fall.

READ MORE: Is Your Business Not Making Enough Money? Here’s How to Fix It

The first and foremost requirement for a pivot to truly succeed is it must solve a major problem. At the time Fab was a hugely successful company, despite the fact that the daily flash sales model wasn’t sustainable in the long-term, choosing to drastically scale down their product offerings moved too far from their identity as a designer store. Fab ultimately created another problem while prematurely trying to solve another.

It’s only natural for a struggling startup to pivot, especially when the alternative is to remain stagnant and unprofitable. However as Fab demonstrated, pivoting for the sake of pivoting, or to expand on a shaky business model will almost always guarantee disaster for any entrepreneur out there. No matter how much money you’ve raised.

READ MORE: How Competitive Collaboration Can Boost Your Business

Too Ambitious, Too Fast

At its peak, in 1999, it was valued at $1.2 billion. Two years later they filed for bankruptcy, laid off 2000 employees, and closed up shop. Webvan could potentially be considered a startup ahead of its time, their vision was a home-delivery service for groceries, where customers could order their groceries online, but that’s not where the problem lies.

15 years later it’s still being studied by business schools around the world as a forewarning against excess and ambition.

Webvan can also be considered a product of its time, the result was that it followed the ‘Get Big Fast’ (GBF) business model that every other startup was religiously following at the time. In 1999 Webvan announced they would expand to 26 major cities.

The following two years became a logistical nightmare with Webvan ultimately losing a total of $830 million before filing for bankruptcy.

“Webvan committed the cardinal sin of retail, which is to expand into new territory before we had demonstrated success in the first market. In fact, we were busy demonstrating failure in the Bay Area market while we expanded into other regions,” said Mike Moritz, former Webvan board member, and partner at Sequoia Capital.

READ MORE: How to Make Money With Your Email List

At some point, every successful startup will have to start scaling up and expanding their business. It seems like common sense, but expansion should only be undertaken when a business model has first proven to be successful.

A few rules of thumb are that a scalable business model should be flexible to be able to adapt to different market conditions, core users and customers are evaluated and understood, and the business model should be able to operate without your direct supervision. Common sense right?

Yet according to the Startup Genome Project’s survey of over 3200 startups , 74% of startup failures can be attributed to premature scaling. Another key finding was that startups, on average, need 2-3 times longer to validate their market than the founders expect. This underestimation of appropriate timelines applies unnecessary pressure on founders to scale prematurely.

Despite early validation, Webvan failed to consistently evaluate the data. If they had paid closer attention then they would’ve seen that their business model was shaky and could not possibly support their desired plans for expansion.

It’s only natural for entrepreneurs to want to grow their business. But as Webvan learned, it’s important to grow your business for the right reasons. To pay attention to the data at hand, and never grow for the sake of growth.

Be Wary of Who You Get in Bed With

Pretty Young Professional was founded by four colleagues at McKinsey, a global consultancy firm, who noticed the lack of resources for young women in the world of entrepreneurship.

It had a simple vision, to provide a weekly newsletter and cultivate a community for young female entrepreneurs. All four were coworkers, friends even, who shared a similar passion and vision. A meeting was held; positions and equity were decided amongst themselves and written on a notepad. And that’s when the trouble began.

READ MORE: How to Build a Profitable Marketing Strategy

Kathryn Minshew, co-founder, and CEO of Pretty Young Professional said that “it came down to some pretty fundamental differences of opinion around where the business should be heading. I think, naively, we assumed that if we kicked the can down the road on some of those things, we’d be able to sort them out.”

Despite the years you’ve shared together and the many years of in-jokes you have, conventional wisdom dictates that it’s a bad idea to mix business with friends.

A study by the University of Auckland Business School found that while maintaining strong friendships with co-workers generally improves work productivity and morale it also creates a dilemma when trying to reconcile personal relationships with professional decision-making.

In business, it’s required that you have to make the logical and necessary decisions in order to benefit your company, even at the cost of personal friendships.

11 months in, the four founders of Pretty Young Professional had split into two camps due to differences in opinion, and a coup was staged. The legality of the original document was called into question, Minshew was hit with a lawsuit and called to step down as CEO, and the editorial team of Pretty Young Professional had their site and email access cut. The company quickly collapsed despite calls from excited investors and a thriving user base.

While it is possible to work with friends and family, it requires completely honest communication, both parties must understand that it really is nothing personal, and, perhaps most importantly, vest your ownership. It’s always best practice to ensure that you legally protect yourself and your assets, a promise between friends rarely holds up in the court of law.

READ MORE: 5 Best Sales Funnel Software Tools to Power Your Business

The Double-Edged Sword of SEO

The premise was simple, to help parents find tutors for their kids online. By 2013 they had over 7000 tutors signed up on their platform and has raised an estimated $1.8 million. Then the rug was swept out from under then and they closed down a few months later, after 3 years in operation.

It appeared that Tutorspree was doing everything right, it had managed to raise an impressive amount of capital from heavyweight investors like Sequoia Capital and Lerer Ventures. They were scaling at a decent pace, albeit not as fast as they wanted, and the business model was proving to be profitable.

However, it fell apart in March of 2013 when Google changed its algorithm and Tutorspree found their traffic reduced by 80% overnight . While this normally wouldn’t cripple a business, it was a catastrophe for Tutorspree. SEO was baked into their business model from the very start and almost all of their customer acquisitions originated from SEO.

“Nor is the largest lesson for me that SEO shouldn’t be part of a startup’s marketing kit. It should be there, but it has to be just one of many tools. SEO cannot be the only channel a company has, nor can any other single-channel serve that purpose.” – Aaron Harris, co-founder, and CEO of Tutorspree.

READ MORE: How to Develop Powerful Business Core Values and Mission Statements

There are many different types of SEO practices, but SEO is essentially improving the visibility and authority of a website by having it rank higher on search engine listings. The entrepreneurial community itself is very divided on the merits of SEO.

The issue with Tutorspree wasn’t whether or not it used SEO effectively or ineffectively. The issue was that due to its effectiveness, the founders became blind to other models of customer acquisition and developed an overreliance on a model they had absolutely no control over.

Google’s algorithm constantly changes and there’s no telling how it will ultimately affect your website’s ranking. Google has consistently proven to burn anyone that chooses to rely on SEO as their main strategy.

It should go without saying that you shouldn’t be putting all your eggs into one basket. Entrepreneurs should invest half their marketing into a high-risk strategy, and the other half in a proven consistent strategy, albeit with a lower return on investment. When it comes to business, you can either live or die by the sword or just be smart and carry a shield.

READ MORE: Building the Perfect Sales Funnel for Your Shopify Store

Failure is difficult to handle, but there is no better teacher. Although every business listed failed spectacularly, all of their founders got back up, dusted themselves off, and forged ahead to eventual success.

While it’s easy to see all the mistakes you made in hindsight, don’t let yourself get to that point. Failure can be seen a mile away if you’re paying close enough attention, even if it means asking yourself some uncomfortable questions. A lot of businesses could have been saved if just the smallest amount of preparation was undertaken, or if founders had just a little bit more patience.

Is there a bigger startup failure that you’ve heard about? We love case studies! Let us know in the comments below.

About Jonathan Chan

Jonathan "JC" Chan is the first Content Crafter at Foundr Magazine. When not writing about anything and everything to do with startups, entrepreneurship, and marketing, JC can be found pretending to be the next MMA star at the gym. He has also contributed to outlets such as  Huffington Post ,  Social Media Examiner ,  MarketingProfs ,  Hubspot  and more. Make sure you  connect with him on LinkedIn !

Related Posts

Simon Sinek: Who’s the Man Behind the Personal Brand?

What Do You Learn in Business School? (Behind the Scenes Look)

What Is the 80/20 Rule? A Guide to Saving Time and Money.

The Best Business Networking Apps for You

How to Be Confident: 8 Data-Backed Ways to Overcome Imposter Syndrome

4 Science-Backed Goal Setting Strategies to Grow Your Business

How to Monetize a Personal Brand with Brand Builders Group’s Rory Vaden

How to Build a Personal Brand to Skyrocket Your Business

Single Tasking: How to Improve Your Focus and Productivity

Why ‘Dormant’ Connections May Be the Most Powerful Network You Have

CEO Nathan Chan Reflects on the 10th Anniversary of Foundr

Analog Methods For Getting Things Done—Superpower Your Productivity With Pen and Paper

5 Reasons Why You Need a Business Coach

How To Be A Better Public Speaker

Jennifer Cohen: You Need Boldness to Build a Business

FREE TRAINING FROM LEGIT FOUNDERS

Actionable Strategies for Starting & Growing Any Business.

Free essays categories

Is here to help you.

Student years are the best time of one’s life. You are in the prime of your life and hopeful about the bright future ahead. This is the period that leaves the funniest photos, the sweetest memories, and gives you the most faithful friends. However, there is one thing that spoils all the fun – assignment writing. Have you ever struggled to write an essay or prepare a speech only to find that the deadline is getting closer, and the work is not ready yet? Are you desperate for someone to have your paper done? Ordering it online is a really convenient option, but you must be sure that the final product is worth the price. is one of the leading online writing centers that deliver only premium quality essays, term papers, and research papers.

Once you place an order and provide all the necessary instructions, as well as payment, one of our writers will start working on it. Be sure we won’t choose a person to do your paper at random. The writer assigned will hold an academic degree in the respective area of expertise, which makes it possible for him/her to find the relevant information, carry out exhaustive research, and develop a comprehensible and well-organized document. The final product will meet all your specifications regarding the content and formatting style. What is more, you will not have to proofread it for any grammatical or spelling errors, because our professionals have a really good command of the English language.

The various domains to be covered for my essay writing.

If you are looking for reliable and dedicated writing service professionals to write for you, who will increase the value of the entire draft, then you are at the right place. The writers of PenMyPaper have got a vast knowledge about various academic domains along with years of work experience in the field of academic writing. Thus, be it any kind of write-up, with multiple requirements to write with, the essay writer for me is sure to go beyond your expectations. Some most explored domains by them are:

• Project management

Finished Papers

We hire a huge amount of professional essay writers to make sure that our essay service can deal with any subject, regardless of complexity. Place your order by filling in the form on our site, or contact our customer support agent requesting someone write my essay, and you'll get a quote.

Writing my essay with the top-notch writers!

The writers you are supposed to hire for your cheap essay writer service are accomplished writers. First of all, all of them are highly skilled professionals and have higher academic degrees like Masters and PhDs. Secondly, all the writers have work experience of more than 5 years in this domain of academic writing. They are responsible for

• Omitting any sign of plagiarism
• Formatting the draft
• Delivering order before the allocated deadline

Finished Papers

Finished Papers

Customer Reviews

Compare Properties

Essay writing help has this amazing ability to save a student’s evening. For example, instead of sitting at home or in a college library the whole evening through, you can buy an essay instead, which takes less than one minute, and save an evening or more. A top grade for homework will come as a pleasant bonus! Here’s what you have to do to have a new 100% custom essay written for you by an expert.

To get the online essay writing service, you have to first provide us with the details regarding your research paper. So visit the order form and tell us a paper type, academic level, subject, topic, number and names of sources, as well as the deadline. Also, don’t forget to select additional services designed to improve your online customer experience with our essay platform.

Once all the form fields are filled, submit the order form that will redirect you to a secure checkout page. See if all the order details were entered correctly and make a payment. Just as payment is through, your mission is complete. The rest is on us!

Enjoy your time, while an online essay writer will be doing your homework. When the deadline comes, you’ll get a notification that your order is complete. Log in to your Customer Area on our site and download the file with your essay. Simply enter your name on the title page on any text editor and you’re good to hand it in. If you need revisions, activate a free 14-30-day revision period. We’ll revise the work and do our best to meet your requirements this time.

John N. Williams

Looking for something more advanced and urgent? Then opt-in for an advanced essay writer who’ll bring in more depth to your research and be able to fulfill the task within a limited period of time. In college, there are always assignments that are a bit more complicated and time-taking, even when it’s a common essay. Also, in search for an above-average essay writing quality, more means better, whereas content brought by a native English speaker is always a smarter choice. So, if your budget affords, go for one of the top 30 writers on our platform. The writing quality and finesse won’t disappoint you!

Premium essay writers

Essay writing help from a premium expert is something everyone has to try! It won’t be cheap but money isn’t the reason why students in the U.S. seek the services of premium writers. The main reason is that the writing quality premium writers produce is figuratively out of this world. An admission essay, for example, from a premium writer will definitely get you into any college despite the toughness of the competition. Coursework, for example, written by premium essay writers will help you secure a positive course grade and foster your GPA.

is here to help you!

Student years are the best time of one’s life. You are in the prime of your life and hopeful about the bright future ahead. This is the period that leaves the funniest photos, the sweetest memories, and gives you the most faithful friends. However, there is one thing that spoils all the fun – assignment writing. Have you ever struggled to write an essay or prepare a speech only to find that the deadline is getting closer, and the work is not ready yet? Are you desperate for someone to have your paper done? Ordering it online is a really convenient option, but you must be sure that the final product is worth the price. is one of the leading online writing centers that deliver only premium quality essays, term papers, and research papers.

Once you place an order and provide all the necessary instructions, as well as payment, one of our writers will start working on it. Be sure we won’t choose a person to do your paper at random. The writer assigned will hold an academic degree in the respective area of expertise, which makes it possible for him/her to find the relevant information, carry out exhaustive research, and develop a comprehensible and well-organized document. The final product will meet all your specifications regarding the content and formatting style. What is more, you will not have to proofread it for any grammatical or spelling errors, because our professionals have a really good command of the English language.