Mumbai: Bankers should never let their guard down and should always watch out for fraudulent activities as it is the only way to prevent them, said Arundhati Bhattacharya, chairman, SWIFT India.
Bhattacharya, who retired as State Bank of India chairman in October 2017, said in an interview that if bankers remain on their toes, the possibility of bank frauds comes down significantly. “It is only when our trust levels go up, we become gullible, stop being attentive or suspicious about things, that frauds happen. Bankers have to maintain their focus on what is going on in order to prevent it," said Bhattacharya.
Bhattacharya was appointed chairman of SWIFT India in December. SWIFT is short for the Society for Worldwide Interbank Financial Telecommunication, a worldwide messaging platform for banks.
She said perpetrators of bank frauds are always thinking up new techniques to defraud banks and the only way to prevent it is being watchful. “While you are thinking of 1,000 scenarios to prevent it, they (fraudsters) will come up with another one. Bankers have to be very conscious of the fact that some people are trying to penetrate the safeguards they have," said Bhattacharya.
In the past, there have been instances of frauds being perpetrated by misusing SWIFT interface. These include jeweller Nirav Modi-perpetrated $2 billion PNB fraud in 2018 and the $81 million heist at the Bangladesh central bank in 2016.
Reuters reported on 5 March 2019 that the Reserve Bank of India (RBI) fined at least 19 lenders, including top banks such as ICICI Bank and SBI, for failing to comply with its guidelines on the use of global payments network SWIFT. The penalties added up more than ₹40 crore and ranged from ₹1 crore to ₹4 crore for each bank, according to stock exchange filings compiled by Reuters.
According to Bhattacharya, the Indian banking industry has been using SWIFT for quite some time as a mode of secured messaging. While these banks, she said, are not averse to using technology, the smaller banks do not always have the wherewithal to adopt expensive technologies.
“That is where the difference lies between small banks and big banks. While large banks have well-established IT departments and they know that when something is being recommended, it needs to be acted upon in the quickest possible manner, some smaller banks may not have the bandwidth to react quickly," she said.
Bhattacharya, who oversaw the merger of five SBI subsidiaries and Bharatiya Mahila Bank with the parent in 2017, stressed the need for bank mergers to make technology spends viable. “The smaller units (banks) will not find it viable to spend the amount that technology and compliance need spending on. If you are a very small unit, it will not be worth your while to do it although you have no choice," she said, adding that if small banks restrict their activities to narrow banking or some kind of niche work, then they can collapse their technology requirements and compliance requirements accordingly and still be viable.
Bhattacharya said public sector banks take time to adopt technology because of the levels of compliance. “If it is new tech project or a project that requires a lot of enhancement to the existing one, you need to go through the expression of interest (EoI), the request for proposal (RFP) and the negotiation process," she said.