In response to a surge in cyber fraud incidents, including the Bank of Baroda World app scam, the Reserve Bank of India (RBI) halted Bank of Baroda’s customer onboarding on its ‘BoB World’ mobile app in October 2023. The Finance Ministry is now proposing stringent measures to combat such frauds, focusing on enhancing cybersecurity and bolstering financial institutions’ due diligence practices.
RBI’s Directive on Bank of Baroda Addressing Supervisory Concerns
In exercising its authority under Section 35A of the Banking Regulation Act, 1949, the RBI directed Bank of Baroda to cease onboarding new customers onto the ‘BoB World’ app due to material supervisory concerns. The directive mandates the bank to rectify observed deficiencies and strengthen related processes to the satisfaction of the RBI before resuming customer onboarding.
Finance Ministry’s Proposed Measures: Strengthening KYC and Data Security
The Finance Ministry’s plan includes advocating for stricter Know Your Customer (KYC) procedures and due diligence by banks and financial institutions, particularly for onboarding new merchants and Business Correspondents (BCs). It emphasizes the necessity for improved data security practices at both merchant and BC levels to mitigate vulnerability to security breaches.
Enhanced Data Protection Practices: Mitigating Concentration Risks
Additionally, the proposal highlights the importance of reviewing the concentration of Business Correspondents in areas with a high incidence of cyber fraud. This measure aims to mitigate risks associated with the clustering of BCs in vulnerable regions, thereby enhancing overall cybersecurity resilience.