Digital Payment Security Controls Directions 2020

In News-The Reserve Bank of India (RBI) has published detailed guidelines to strengthen India’s digital payments architecture.

The rationale behind the move

• There have been reports that digital payment frauds have been on the rise during the pandemic as individuals have been using the digital payments option heavily to conduct monetary payments/transactions safely.
  • Further, an increase in the volume of digital payments has led to other problems as well such as system failures, technical glitches etc.

Key Highlights

• It provides necessary guidelines to set up a robust governance structure and implement common minimum standards of security controls for digital payment products and services.
• These rules are directly applicable for scheduled commercial banks, small finance banks, payment banks and credit card-issuing NBFCs.
• The new set of norms also specifies the criteria under which regulated entities can form partnerships and interact with third-party apps and ecosystem players such as mobile applications, payment operators and gateways.
• It issues specifications on a diverse set of application areas, including mandates from source code protection of third-party UPI apps, cybersecurity guidelines for safety against external attacks, card payments and internet banking security protocols.
• It will also affect the business models of several payment gateways that rely on the delayed settlement of merchant funds to banking partners.
• The Board and Senior Management shall be responsible for the implementation of this policy.
• All regulated entities have been given six months to ensure compliance.

Relevance

• The guidelines will be technology and platform agnostic, it will create an enhanced and enabling environment for customers to use digital payment products in a more safe and secure manner.

Other Safeguards available to tackle financial frauds

• Advisory Board for Banking Frauds (ABBF) –The Central Vigilance Commission (CVC) has constituted an Advisory Board for Banking Frauds (ABBF) headed by former Vigilance Commissioner T.M. Bhasin to examine bank fraud of over ?50 crores and recommend action.

• Fugitive Economic Offenders Act, 2018- It has been enacted to deter economic offenders from evading the process of Indian law by remaining outside the jurisdiction of Indian courts.
  • The act provides for attachment of property of a fugitive economic offender, confiscation of property and disentitlement of the offender from defending any civil claim.

• Project Sashakt – It is a five-pronged strategy to resolve bad loans and bring credit discipline to the banking sector.
  • It is based on the recommendation of a committee led by PNB chairman Sunil Mehta.
  • It aims to ensure the operational turnaround of the banks and stressed companies so that the asset value is retained.
• Bad Bank- A bad bank is a financial entity set up to buy non-performing assets (NPAs), or bad loans, from banks.
  • Also known as Asset Reconstruction Company (ARC)
  • Bad bank is not involved in lending and taking deposits, but helps commercial banks clean up their balance sheets and resolve bad loans.
  • It helps to ease the burden on banks by taking bad loans off their balance sheets and getting them to lend again to customers without constraints.

Source :ET