In a bid to address the rising incidence of financial scams and cyber frauds, the Indian government is set to introduce stricter measures for onboarding merchants and Business Correspondents (BCs) by banks and financial institutions.
According to sources, the finance ministry is making a strong case for an enhanced Know-Your-Customer (KYC) procedure and extensive due diligence to safeguard customers against cyber risks and financial frauds, such as those involving the BoB World app.
The rationale behind these proposed measures is the need to strengthen data security and protection at the merchant and BC level, as these are the areas more vulnerable to compromise, sources told the PTI news agency.
“Appropriate due diligence of merchants and Business Correspondents (BCs) who offer banking services in rural and remote areas is necessary not only to check fraud but also to fortify the financial ecosystem,” a source said.
The government’s push for tighter onboarding norms comes against the backdrop of a significant rise in financial cyber fraud cases in the country. According to data compiled by the National Crime Records Bureau (NCRB), as many as 11,28,265 cases of financial cyber fraud worth Rs 7,488.63 crore were reported during 2023.
To address this growing concern, the finance ministry has suggested that the Reserve Bank of India (RBI) may advise banks and financial institutions to review the concentration of BCs in cyber fraud hotspots and their onboarding, as well as the blocking of micro ATMs found to be involved in such frauds.
The government’s efforts to curb cyber crimes and financial frauds also include the setting up of the ‘Indian Cyber Crime Coordination Centre’ (I4C) by the Ministry of Home Affairs, which will deal with all types of cyber crimes in a comprehensive and coordinated manner.
Additionally, the RBI is considering establishing a ‘Digital India Trust Agency’ (DIGITA) to verify digital lending apps and maintain a public register of verified apps, in a bid to stop the proliferation of illegal lending apps.
As the financial landscape continues to evolve, the government’s focus on enhancing customer protection and the overall integrity of the financial ecosystem is seen as a crucial step in mitigating the growing threat of cyber-related frauds and scams.
