Focus On Cybersecurity, Prevent Large Corporate Frauds & Wilful Defaults: FM

NARCL and PSBs should expedite on-boarding of stressed accounts; Coordination between banks, security agencies, regulatory bodies and technology experts will create a more resilient financial ecosystem: Nirmala Sitharaman

Union Minister for Finance and Corporate Affairs Nirmala Sitharaman reviewed the performance of PSBs in New Delhi, on Saturday

FinTech BizNews Service

Mumbai, November 31, 2023: Union Minister for Finance and Corporate Affairs Smt.

Nirmala Sitharaman chaired a meeting to review the performance of Public Sector

Banks (PSBs) on various parameters, in New Delhi, on Saturday. The meeting was

also attended by Union Minister of State for Finance Dr Bhagwat Karad; Dr Vivek

Joshi, Secretary, Department of Financial Services; heads of public sector banks

besides senior officials of the department of financial services.

Acquisition Of Stressed Accounts

The progress on the acquisition of accounts by the National Asset Reconstruction

Company Ltd (NARCL) was also deliberated. The Finance Minister directed that the

acquisition of stressed accounts by NARCL needs to improve further, and necessary

efforts must be made in this direction. It was advised that NARCL and banks should

hold regular meetings to expedite the on-boarding of stressed accounts.

Attractive Deposit Schemes

In addition to the above measures, Smt. Sitharaman emphasised the importance of

mobilising deposits, urging PSBs to innovate and offer attractive deposit schemes to

enhance their deposit base, which will also enable them to extend more credit.

Frauds: Critical Threat To FIs

During deliberations on the fraud related matters, the Union Finance Minister, while

expressing satisfaction at the improved performance of the Public Sector Banks,

stated that bank frauds pose a critical threat to the security of both individual

customers and the financial institutions themselves, which can lead to financial

losses and reduced public trust in the banking system.

Advanced Fraud Detection Mechanisms

Smt. Sitharaman asked PSBs to concentrate on fraud prevention activities

concerned with both large corporate frauds and wilful defaults, as well as on actions

that defraud individual customers. The Union Finance Minister instructed the banks

to adopt advanced fraud prevention and detection mechanisms and ensure that the

customers are further educated about safe banking practices.

More Effort Into Recovery

The Union Finance Minister directed Banks to undertake consumer education

measures for protection from malicious fraud calls and to make efforts for timely

identification of accounts as fraud and their subsequent investigation. Banks were

also advised to put more effort into recovery from accounts declared as fraud and

willful default. The Union Finance Minister also asked banks to monitor the early

warning signals to check potential frauds.

Review Performance Of Counsel

Recognising that the effectiveness of legal action against defaulters before courts

and tribunals largely depends on effective representation by lawyers and attorneys

assisted by bank officials, the Union Finance Minister called for a performance

review of counsel representing PSBs to ensure better legal outcomes.

Responsible Lending

Smt. Sitharaman stated that the willful defaults not only strain the banks’ financial

health but also hamper the flow of credit in the economy and urged the PSBs to

adopt responsible lending practices across the board. The Union Finance Minister

instructed the PSBs to enhance due diligence before loan disbursement, ensure

regular monitoring of large loan accounts, and undertake swift and thorough legal

action in cases of such default.

Act Against Conniving Officials

Smt. Sitharaman also exhorted the banks to take strict administrative action against

the conniving officials of the banks, who enable fraud and wilful defaults.

Cyber Security Risks

Other issues related to cyber security were also deliberated in the meeting. The

preparedness of all the PSBs in addressing cyber security risks was reviewed by the

Union Finance Minister and PSBs were directed to ensure privacy of customer data.

Smt. Sitharaman stated that issues of cyber security should be seen from a system

perspective as a small vulnerability can be used by nefarious elements to create

system-wide risks.

Adapt To Evolving Digital Landscape

Further, the Finance Minister noted the need to adopt proactive cybersecurity

measures and implement stringent security protocols to protect sensitive financial

information and systems from cyber-attacks and exhorted the banks to adapt to the

evolving digital landscape, ensuring that the integrity of domestic financial systems

remains uncompromised.

Collaboration And Mutual Learning

The Union Finance Minister also emphasised the importance of collaboration and

mutual learning among the PSBs and coordination between banks, security

agencies, regulatory bodies and technology experts to create a more resilient

financial ecosystem against potential cyber-security threats.

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