Punjab National Bank (PNB), the ninth-largest commercial bank and the second-largest public sector bank in India, deserves its place in the history of the country’s banking industry. In a sense, the history of PNB Bank is also the story of the evolution of the Indian banking sector. In fact, PNB’s history can be traced back to the pre- and post-independence era of India and hence it is a very special institution in the country that witnessed the dreams and struggles of the emerging nation.
Accordingly, as PNB advances into the 21st century, the bank’s strategic objectives include the emphasis on the role of technology, the development of new products and services, and the principle of financial inclusion. Thanks to its especially rich history and innovative banking products, PNB is set to remain one of India’s key banking players in the coming years.Â
History of PNB
PNB was established on April 12, 1895, in Lahore under the name ‘Pan India Investment Bank Limited.’ It was founded to create a native type of bank that would not be influenced by foreign powers, yet serve the purpose. The founding members were accomplished nationalists who were closely associated with the freedom struggle, including Lala Lajpat Rai. Thus, PNB bank’s history proves that it aimed to impart a feeling of financial freedom among Indians at a time when all major financial institutions were owned by British and European powers.
The first branch was established at Anarkali Bazaar, Lahore. Since its inception, the bank had a liberal outlook because it had a student circle as its initial target group and focused on serving the needs of the common man and budding entrepreneurs. Initially, it mainly concerned itself with encouraging a savings culture, gave credit to small-scale businesses, and supported the main economic activity, agriculture.
Pre-independence phase
In the pre-independence period, PNB was more than a bank. It reflected the spirit of future India which was on the path of establishing itself politically and economically. The bank had to struggle amid difficult circumstances such as political instability, financial crisis, and two world wars. However, PNB remained firm on its expansion plans, opening more branches and acquiring customers.
Early growth and challenges
As mentioned earlier, PNB was able to tap opportunities during the early part of the twentieth century, but it did face challenges. Nevertheless, PNB continued to demonstrate its strength and relevance when following the mentioned objectives which are to develop Indian businesses and empower the local population. From the above challenges, the bank was able to expand as it established branches in different regions across the country.
Among the major events that took place in that period was that PNB acquired Bharat Bank Ltd, which not only extended its geographical network but also added to its strength. This move enabled the bank to have a much better standing in the Indian banking industry.
Nationalistic outlook
Most of the founding fathers of PNB had direct involvement with the freedom struggle of India and the philosophy of PNB had a very strong nationalist perspective. The founders themselves had some idea of the problems and it is certain that one of the objectives of the founders was to encourage Indian industry and commerce and to discourage the tendency of borrowing from foreign banks. The bank was also supportive of social and political activities to attain freedom from the British Raj. It not only helped PNB stand out from the competitors, but also endeared it to the Indian population.
World War and economic struggles
WWI (1914-1918) & WWII (1939-1945) were testing years for PNB due to the wars which impacted its performance. Due to the wars, economic problems like inflation and scarcity of essential materials and food were rife. However, PNB was able to ride through such dire circumstances through proper banking discipline..
The Great Depression also triggered many bank failures across the world. But nevertheless, PNB proved to have a sound capital structure and prudent operation management. These experiences acted as the foundation to build future successes for the bank and helped the bank become more robust.
Post-independence phase
Political independence in 1947 changed the course of PNB bank’s history as aspirations of millions of Indians began to take shape. However, lack of proper planning and future vision cost the bank dearly with the partition of the country into India and Pakistan. This was a big setback to the institution because it had to re-establish its entire operations in India. However, the bank did not take much time in adjusting to the new political maps along with the new economy map and relocated its headquarters to New Delhi.
The partition and its aftermath
The division that took place in 1947 was a difficult period for PNB in terms of operations as it had lost nearly half of its area and its office located in Lahore. The partition led to severe disruption in business. Nonetheless, the bank managed to regain its position in India, by moving its offices to New Delhi. Despite this storm, PNB was among those few banks which succeeded in restoring its banking operations.
Nationalization of banks in 1969
Another milestone in the evolution of PNB was in 1969 when the government of India nationalized 14 large commercial banks, including Punjab National Bank. This was part of the government’s regulation plan with the aim of centralizing banking activities and ensuring that all financial institutions were aligned with the development objectives of the country, extending their services to agricultural, small business, and rural sectors.
After nationalization, it was converted into a state-owned PSU bank and the resultant stability and resources made it possible for PNB to carry out its operations and indeed, expand further. The bank then steered towards rural banking and financial sustainment which is strategic to the government’s development plan. This shift made it possible for PNB to increase total PNB branches in India and services deep into the rural areas, helping millions of Indians to gain access to banking services.
Technological advancements and modernization
In the course of the second half of the twentieth century, PNB adopted innovations in technology to boost the quality of services offered and increase the organizational effectiveness of the operations. In the 1980s and 1990s, the bank began to computerize its branches, enabling it to operate effectively and offer more services to customers.
Economic liberalization in 1991 brought far-reaching changes in the banking sector in India. Having brought out these changes and marked the beginning of an evolution in banking sectors, PNB too adopted modern banking practices and expanded its range of products and services. It ventured into sub-sectors including retail banking, corporate banking, international banking, and asset management among others.
Expansion and mergersÂ
In terms of the changes which occurred in PNB in the recent past, the most important event could be the merger of United Bank of India and Oriental Bank of Commerce with PNB in 2020. This was an India-driven merger that formed part of a strategy to amalgamate many public sector banks in the country with the aim of having well-fortified banks. The merger positions PNB in the list of largest public sector banks in India, both in terms of assets and branch network.
As a result of this merger, PNB branches in India expanded across the country, especially in the east and northeast regions of India where United Bank of India had more branches. The coming together of the two also afforded the merged entity a more diversified clientele, offering its services to individuals right from small-scale farmers to big conglomerates.
Challenges and achievements
Like several established institutions in India, Punjab National Bank too had its share of infamy. Among the high-profile cases in recent years is the fraud case involving top managers of PNB and diamond merchant Nirav Modi which exposed chinks in the bank’s internal controls. These problems were promptly addressed by the bank through changes in compliance regulations and improvement in the risk management system.
Conclusion
The growth of Punjab National Bank, starting from a small venture established in 1895 to a leading public sector bank in India is the story of the organization’s strength, flexibility, and vision. From the founding of Punjab National Bank in Lahore to its amazing growth in India, PNB has the vision of giving people and businesses the tools to become financially empowered through banking services. PNB bank’s history is closely linked to India’s history before and after its independence, offering a ringside view of the evolution of the country’s banking industry.
