As a repercussion of the 11,300 crore fraud that struck the Punjab National Bank, the Reserve Bank of India has instructed all the banks to integrate their internal software with the SWIFT inter-bank messaging system by April 30.
The Central Bank has directed the lenders to adhere to more than two dozen items within set timelines in a letter dated Feb. 20, a copy of which was seen by Reuters.
“The recent detection of a large-value fraud … indicates ineffective implementation of the prescribed controls,” the RBI said in the memo, sent to heads of all commercial banks.
Most of the banks in India have not linked their core banking systems with SWIFT, a network which is extensively used by global banks to communicate with each other on transactions. The RBI has said that the banks must not send any transaction message on the SWIFT system or authorise any loan or guarantee without making sure that it was reflected in the core banking system.
Other measures taken by the RBI to tighten controls include a limit on foreign currency payment instructions where beneficiaries were individuals and an additional layer of security on transactions beyond a certain threshold.
Most of the actions have to be implemented with immediate effect, while the deadlines for others range from the end of March to the end of June.
Chief executive of Allahabad Bank and head of the Indian Banks’ Association, Usha Ananthasubramanian said the urgency of the demand to integrate with SWIFT was such that “maybe I’ll shelve one project and step into this and tell my vendor to fast track this”.
The move to tighten controls over SWIFT comes after the revelation of the Nirav Modi-PNB scam in which two employees at a Mumbai branch issued unauthorised guarantees that allowed the firms to secure loans from overseas branches of Indian banks. The bank alleged that the fraud dates back to 2011 and stayed undetected as the employees did not enter the transactions in PNB’s core software after sending instructions to overseas banks through SWIFT.