RBI asks banks to integrate SWIFT with core banking solutions by April 30

Answer: SWIFT.

Banks will have to integrate SWIFT (Society for Worldwide Interbank Financial Telecommunication) with its core banking solutions (CBS) by April 30 as per the latest instructions given by the central bank.

Reserve Bank of India (RBI) has asked banks to do so as part of its efforts to tighten internal controls in banks following the Rs 11,400 crore fraud that was unearthed at Punjab National Bank last week.

CBS is a centralised software used to support a bank’s most common transactions.

“That (30 April) could be a deadline but it is an outer limit. Today, the urgency is such that every one wants this project to be on fast track,” said Usha Ananthasubramanian, chief of Allahabad Bank, on the sidelines of Indian Banks’ Association banking technology event on Frid

“There is already a mandate from RBI that you need to comply with this straight through processing and combining SWIFT to CBS, who have not done. Everybody has started (sic),” Ananthasubramanian , who is also the managing director and chief executive of Allahabad Bank, said.

According to her, a memo has been sent to banks regarding the RBI mandate.

The PNB fraud modus operandi has brought attention to the fact that many banks don’t have SWIFT integrated into their CBS. Ananthasubramian also said that Allahabad Bank, like many other banks, has not integrated SWIFT with CBS till now.

On asking if banks will be able to meet the deadline, a senior official at IBA, hinted that though it may be difficult banks will have to at least begin the process of integration.

Moneycontrol had reported that the PNB fraud has led many banks to review their internal processes and have started centralisingand linking their processes to CBS.

While the IBA has not sent any memo to banks, Ananthasubramian said that each bank will have to review their control systems and technology separately, as their problems and loopholes may differ. She also added that technology becomes obsolete very soon and it is necessary for banks to undertake the constant review.

Ananthasubramian, who was previously the MD & CEO for PNB during August 2014 to 2017, refused to comment on the PNB fraud.

However, she said the PNB fraud has highlighted the need for banks to review their internal controls and security. Rogue elements should not jeopardise the security and integrity of banks be it with or without collusion from outsiders.

The mega PNB fraud surrounds around SWIFT technology which was misused by two of its branch officials to fraudulently issue letters of undertaking, ( kind of Bank guarantees), to diamond and jewellery importer Nirav Modi-linked companies without getting proper approvals and without making entries in the CBS.

The isolation of SWIFT from the CBS enabled the transactions to go undetected for over seven years.

In a press release on February 20, RBI said that it has warned banks on at least three occasions since August 2016 on 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 the RBI’s communications, for pre-empting such occurrences. Banks have, however, been at varying levels in implementation of such measures,” it said.

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