In a bid to tighten internal controls in the banks, the Reserve Bank of India (RBI) has asked banks to integrate SWIFT (Society for Worldwide Interbank Financial Telecommunication) with its Core Banking Solutions (CBS) by April 30.
The central bank’s direction comes in the view of the Rs 11,400 crore Nirav Modi fraud that was detected by the Punjab National Bank (PNB) at one of its branches in Mumbai last week.
Diamond jewellers Nirav Modi and Mehul Choksi allegedly acquired fraudulent letters of undertaking (LoU) from PNB to secure overseas credit from other lenders.
The LoUs were not recorded in the PSU lender’s books and therefore were undetected for a long time.
Indian Banks Association (IBA) chairperson Usha Ananthasubramanian said there is an urgency to fast-track SWIFT-CBS linkage.
A memo has also been sent to banks regarding the RBI mandate, she added.
Earlier, the RBI had 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.
“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.
“The 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.” the RBI said in a statement.
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.