The RBI's ban on the Bank of Baroda World App strengthens measures against cyber fraud

Description

In October 2023, the Reserve Bank of India (RBI) suspended client onboarding on Bank of Baroda's 'BoB World' mobile app due to an increase in cyber fraud occurrences, notably the Bank of Baroda World app scam. The Finance Ministry is now proposing stringent steps to combat such frauds, with an emphasis on improving cybersecurity and strengthening financial institutions' due diligence procedures.

RBI's Directive For Bank Of Baroda Addressing Supervisorial Concerns

In exercising its authority under Section 35A of the Banking Regulation Act of 1949, the RBI asked Bank of Baroda to stop onboarding new users to the 'BoB World' app due to serious supervisory concerns. The regulation requires the bank to address discovered flaws and tighten related processes to the satisfaction of the RBI before restarting customer onboarding.

Finance Ministry Proposed Measures: Strengthening KYC And Data Security

The Finance Ministry plans to advocate for tougher Know Your Customer (KYC) protocols and due diligence by banks and financial institutions, particularly when onboarding new merchants and Business Correspondents (BCs). It underlines the importance of improving data security practices at both the merchant and BC levels in order to reduce vulnerability to security breaches.

Enhanced Data Protection Practices: Mitigate Concentration Risks

Furthermore, the idea emphasizes the significance of examining the concentration of Business Correspondents in locations with a high rate of cyber fraud. This technique intends to reduce the risks associated with the clustering of BCs in sensitive regions, hence improving overall cybersecurity resilience.

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