Integrate SWIFT with core banking solutions by April 30, RBI tells banks

MUMBAI: The Reserve Bank of India (RBI) has set April 30 as the deadline for banks to integrate SWIFT (Society for Worldwide Interbank Financial Telecommunication) with core banking solutions (CBS) as it looks to strengthen internal controls in banks following the ₹11,400 crore fraud at Punjab National Bank (PNB).

“That (April 30) could be a deadline but it is an outer limit. Today, the urgency is such that everyone wants this project to be on fast track,” said Usha Ananthasubramanian, managing director and chief executive officer of Allahabad Bank, on the sidelines of the Indian Banks’ Association banking technology event on Friday. She is also the chairman of the Indian Banks’ Association.

“There is already a mandate from RBI that you need to comply with this straight through processing and combining SWIFT with CBS... Everybody has started...,” she added.

The PNB fraud revolves around SWIFT. Branch officials of the lender fraudulently issued letters of undertaking, basically guarantees, to jeweller Nirav Modi-linked companies without getting proper approvals and without making entries in CBS, the software used to support a bank’s most common transactions.

The scam that happened via SWIFT went undetected since it was not linked to CBS and because checks failed at several levels, say experts.

In a press release on February 20, RBI said that it has warned banks on at least three occasions since August 2016 about putting in place safeguards in the SWIFT system.

“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 RBI’s communications, for pre-empting such occurrences. Banks have, however, been at varying levels in implementation of such measures,” the central bank said.

RBI announced the setting up of a panel under the chairmanship of Y H Malegam, a former member of its central board of directors, to study rising cases of bank fraud and set out a blueprint to curb them.

In a letter to banks, the RBI also reiterated that banks must strictly comply with the principle of “four eyes” (maker, checker, verifier and authoriser of message) in dealing with SWIFT, according to two people who have seen the letter.

Today, the urgency is such that everyone wants this project to be on fast track

USHA ANANTHASUBRAMANIAN, MD and CEO, Allahabad Bank