Over the past couple of months, the news coverage is mainly of the frauds happening in the Indian banking sector. Be it the Punjab National Bank approx. Rs. 12,000 crores loan fraud or the ICICI –Videocon scam or the Rotomac fraud where seven consortium banks were cheated of Rs. 3700 crores. Altogether in the financial year 2017-2018, a total loss of Rs 25,775 crores has been incurred by 21 Public sector banks due to different fraud cases. These frauds /scams that have been taking place in the banks has shaken the foundation of the banking sector.

The reason for these frequent crises can be attributed to the fact that there were glitches in the operational aspect of the bank. The system was not robust enough to identify any wrongdoing in the initial phase itself, had the system been thorough then the concerned authority could have ascertained the malpractices before it went out of control. The internal controls of the banks were faulty, and there have been violations on the part of the management, auditors and certain bank employees as well, who failed to recognize the fraud in the making.

All the reasons stated above are all the technical aspects of why the fraud happened, but there is another aspect which has been overlooked, i.e., the role of the leader in these fiascos. Whatever breach of the rules occurred in the bank the superior authority of the bank had to know about it. Then why did they let these happen and allowed it to become so huge that it shook the foundation of the industry?

This crisis has opened a virtual Pandora's Box of the various behavioural aspects which are equally responsible for these situations. Manipulation or distortion of facts, withholding and hoarding information, covering up of mistakes are some of the behaviours which can be seen in a low-trust organization. When an organization is facing these issues, it is the job of the leader to inspire trust, this motivates and in return encourages the team members as well. The leader should demonstrate specific behaviors to inspire trust in the team. Talking straight, correcting mistakes, showing respect, creating transparency are some of the behaviours a leader should practice towards creating a high-trust organization.

Another aspect which comes across is the lack of accountability in the people. The leaders have to hold themselves accountable as well as they have to hold others accountable too. When people are held accountable, they become responsible for their actions, and a positive work environment is created in the organization which is conducive to creating an ethical work culture.

Banks have to aggressively implement certain measures both internally and externally which can restore the faith back in the banking system. They have to assure their customers that in spite of the setback the industry has faced implementing strict laws and rules in their dealings is the need of the hour, and banks would enforce a fail-proof system ensuring that the possibility of any cheating can be prevented at the initial stage itself at the same time ensuring they present a customer focused and friendly work culture.

The banking sector is the backbone of the economy and hence it is essential that the trust in the industry has to be restored as quickly as possible.