BoB World app scam: How FinMin plans to deal with financial frauds

In a bid to check incidence of BoB World app scam and other such financial frauds, the finance ministry proposes an enhanced KYC procedure and extensive due diligence by banks and financial institutions for onboarding merchants to safeguard customers against cyber risks, according to PTI sources.

What was the Bank of Baroda app scam

In September 2021, Bank of Baroda (BoB) launched a digital banking app, 'bob World', aiming to consolidate all banking services into one platform with four key pillars — Save, Invest, Borrow, and Shop. This initiative mirrored the strategy of another state-owned bank, SBI, and its YONO digital platform. However, BoB's execution faced significant challenges. Staff, under pressure to convert high numbers of existing customers to the new app, manipulated the onboarding process. They improperly linked customer accounts to random mobile numbers, including those of bank staff and their relatives, to facilitate app registrations. This misconduct not only inflated the app's usage statistics but also posed severe security risks, as outsiders could potentially access and drain these accounts.

This malpractice led to broader repercussions. Following whistleblower revelations and media reports, the RBI intervened, banning BoB from adding new customers to the 'bob World' app. The bank was directed to rectify these issues and enhance its processes to the regulator's satisfaction before resuming normal operations. Subsequently, BoB suspended over 50 employees, including several senior managers, as part of a crackdown on these irregularities. The bank pledged to cooperate with the RBI to resolve the concerns swiftly.

Finance Ministry's plan: Review Bank's Business Correspondents

Officials stress the importance of detailed scrutiny of merchants and Business Correspondents (BCs) who provide banking services in rural and remote areas. This measure is crucial not only to prevent fraud but also to reinforce the financial ecosystem.

BCs are bank representatives, they help villagers to open bank accounts. Business Correspondents get commission from the bank for every new account opening, every transaction made via them, every loan-application processed etc.

Finance Ministry's plan: Address data security concerns at merchant level

The need to bolster data protection and security at the merchant and BC level is critical, as these areas are more susceptible to breaches. The Reserve Bank of India (RBI) might instruct financial entities to review the deployment of BCs, especially in regions prone to cyber fraud, PTI reported. Additionally, the RBI may even block micro ATMs involved in fraudulent activity.

Cyber security enhancements

At a recent inter-ministerial meeting, strategies were discussed to enhance cyber security and tackle financial fraud more effectively. In 2023, over 1.1 million instances of financial cyber fraud, amounting to Rs 7,488.63 crore, were reported by the National Crime Records Bureau (NCRB).

The Ministry of Home Affairs has established the 'Indian Cyber Crime Coordination Centre' (I4C) to address various types of cyber crimes across the nation comprehensively.

Regulating digital lending

In response to the increase in cyber fraud, the RBI is contemplating the creation of the Digital India Trust Agency (DIGITA). This agency would oversee the verification of digital lending apps and maintain a registry of approved apps. The RBI has also shared a list of 442 unique digital lending apps with the IT Ministry for approval and inclusion in Google's whitelist.

Following interventions by the RBI and the Department of Financial Services, Google has removed over 2,200 unauthorised digital lending apps from its Play Store. The tech giant has updated its policies to feature only apps either published by RBI-regulated entities or those partnering with them.