RBI alerted banks on possible misuse of SWIFT

The Reserve Bank of India (RBI) on Tuesday released a statement asserting that it had confidentially cautioned and alerted banks on the possible misuse of SWIFT, on at least three occasions since August 2016.

SWIFT or Society For Worldwide Interbank Financial Telecommunication is the tool used for international money transfer.

"The risks arising from the potential malicious use of the SWIFT infrastructure, created by banks for their genuine business needs, has always been a component of their operational risk profile. RBI had, therefore, confidentially cautioned and alerted banks of such possible misuse, at least on three occasions since August 2016, advising them to implement the safeguards detailed in the RBI's communications, for pre-empting such occurrences. Banks have, however, been at varying levels in implementation of such measures," the apex bank said in a statement.

RBI also said it has formed a panel to look into reasons for factors leading to increasing incidents of frauds in banks.

The panel will also look into reasons for high divergence in Non-Performing Asset (NPA) classification and provisioning by banks.

"In view of large divergences observed in asset classification and provisioning in the credit portfolio of banks as well as the rising incidence of frauds in the Indian banking system, it has been decided to constitute an Expert Committee under the chairmanship of Y H Malegam, a former member of the Central Board of Directors of RBI, to look into the reasons for high divergence observed in asset classification and provisioning by banks vis-a-vis the RBI's supervisory assessment, and the steps needed to prevent it; factors leading to an increasing incidence of frauds in banks and the measures (including IT interventions) needed to curb and prevent it; and the role and effectiveness of various types of audits conducted in banks in mitigating the incidence of such divergence and frauds," the statement added.

In the wake of SWIFT-related fraud involving significant amount, reported recently by Punjab National Bank (PNB), RBI in the statement also reiterated its confidential instructions and mandated the banks to implement, within the stipulated deadlines, the prescribed measures for strengthening the SWIFT operating environment in banks.

The members of the committee include Bharat Doshi, member, Central Board of Directors, RBI; S Raman, former chairman and MD, Canara Bank and former whole-time member, SEBI; and Nandkumar Saravade, chief executive officer, Reserve Bank Information Technology Pvt Ltd (ReBIT).

A K Misra, executive director, RBI will be the member-secretary of the committee.