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Reserve Bank of India releases statement on warnings issued to banks on possible misuse of SWIFT

New Delhi, Feb 21: The Reserve Bank of India (RBI) has issued a declaration stating that it had confidentially warned and informed banks on the probable abuse of SWIFT, on three occasions since August 2016.

SWIFT or Society For Worldwide Interbank Financial Telecommunication is the method used for transferring money globally. 

In its statement, the Reserve bank has stated that "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 the implementation of such measures."

Further, RBI maintained that it has constituted a committee to examine the causes for circumstances heading to growing events of scams in financial institutions.


The committee would also study the causes of high deviation in Non-Performing Asset (NPA) classification and provisioning by banks.
The RBI statement added, "in view of large divergences observed in asset classification and provisioning in the credit portfolio of banks as well as the rising incidence of frauds in the Indian banking system, it has been decided to constitute an Expert Committee under the chairmanship of Y H Malegam, a former member of the Central Board of Directors of RBI, to look into the reasons for high divergence observed in asset classification and provisioning by banks vis-a-vis the RBI's supervisory assessment, and the steps needed to prevent it; factors leading to an increased incidence of frauds in banks and the measures (including IT interventions) needed to curb and prevent it; and the role and effectiveness of various types of audits conducted in banks in mitigating the incidence of such divergence and frauds."

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