RBI Press Release – INR90/- Lacs penalty on IDBI Bank Ltd

 

RBI Press Release – INR90/- Lacs penalty on IDBI Bank Ltd

Reserve Bank of India imposes monetary penalty on IDBI Bank Limited

The Reserve Bank of India (RBI) has imposed, by an order dated April 07, 2022, a monetary penalty of ₹90 Lakh (Rupees Ninety Lakh only) on IDBI Bank Limited (the bank) for non-compliance with the directions issued by RBI on

·         “Frauds - classification and reporting by commercial banks and select FIs”,

·         “Strengthening the Controls of Payment Ecosystem between Sponsor Banks and SCBs/UCBs as a Corporate Customer”

·         “Cyber Security Framework in Banks”.

The penalty has been imposed in exercise of powers vested in RBI under the provisions of Section 47 A (1) (c) read with sections 46 (4) (i) of the Banking Regulation Act, 1949 (the Act).

Reserve Bank of India, further stated that this  action is based on the deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.

Background

The Statutory Inspections for Supervisory Evaluation of the bank were conducted by RBI with reference to its financial positions as on March 31, 2017, March 31, 2018 and March 31, 2019, and the examination of the respective Risk Assessment Report, Inspection Report and all related correspondences pertaining to the same, and also the reported incident of multiple fraudulent transactions over two days on June 08 & 09, 2019 in the accounts of two corporate Net banking customers (Co-operative banks) and the related correspondences in that regard, revealed, inter alia, non-compliance with the aforesaid directions to the extent it

(i) reported frauds to RBI with delay

(ii) submitted Flash Reports in respect of frauds involving an amount of ₹5 crore and above to RBI with delay

(iii) failed to implement time restrictions on holidays and data access control for corporate net banking to put through fund transfer resulting in unauthorized debit transactions in the account of two co-operative banks.

            The (iii) point is very interesting from a cyber security perspective. As per my understanding, Co-operative banks should not be able to do any transactions via Net Banking on Banking Holidays

            Eg: Cooperative Bank should not be allowed to do any funds transfers via Net Banking on Sundays, 2^nd and 4^th Saturdays, and local bank holidays.

            The logic is on bank holidays, there will be no requirement for any funds transfer. Also, cooperative Bank staff will not monitor their account on holidays. This offers a great opportunity for fraudsters to try out their luck!!

            As per a 2016 document available on Internet, there are two distinct Product codes for Co-operative Bank accounts

Scheme Code – NCOPB Non-Scheduled Cooperative Bank

Scheme Code – CCSCB Current Corporate State Cooperative Bank

Technically, based on the Scheme Codes, the Bank may think of implementing the ‘time restrictions on holidays’ process

        

            You may be interested @ https://www.idbibank.in/pdf/soc/Co-operative-Bank-Current-Account.pdf

 

Disclaimer: These are my personal opinions only. The bottom line is Safe ePayments. Nothing more – Nothing less