Expectations are growing for the RBI to adopt a more constructive approach to digital data scrutiny, thereby prompting financial institutions to bolster customer security measures.
The Reserve Bank of India (RBI) issued a directive to the Bank of Baroda (BoB) on October 10, mandating a suspension of new customer recruitment via its digital banking application, BoB World. This decisive move by the RBI against Bank of Baroda has prompted other financial institutions to reassess their digital transformation procedures, rectify vulnerabilities, and closely oversee their staff to preempt any undesirable occurrences.
As market regulators and central banks continue to take stricter steps to lower the number of frauds and mishandling of customer funds, many anticipate that the RBI will adopt a more constructive approach to examining digital data and refrain from accepting information at face value in the future. While the central bank hasn't initiated any explicit inquiries or requested additional disclosures from other banks, caution is prompting other institutions to exercise greater vigilance concerning customer security, as per a report by the Economic Times.
"So far the RBI used to take updates and data on the progress of digital channels from banks at face value, but going forward we expect more scrutiny and comments from the RBI on this," the digital head of a private sector bank told The Economic Times.
In response to the RBI's directive, the Bank of Baroda issued a statement offering assurance that it has promptly implemented corrective measures to rectify the issues highlighted by the RBI. The bank is actively pursuing additional measures to close any remaining vulnerabilities, reported the Economic Times.
Last month during an investigation into a significant forex-based black money case, regulatory bodies like Sebi and stock exchanges are closely examining banks for potential breaches of disclosure norms related to listed firms, including the state-run Bank of Baroda. They have also sought clarifications from private sector lenders such as HDFC Bank and Axis Bank.
"The message from the regulator is clear...be it a large or small bank, public sector or private sector, there should be accountability," a senior public sector bank executive said.