The Finance Ministry has called upon state-owned banks to conduct a comprehensive review of their digital systems and processes following the recent UCO Bank debacle. Sources indicate that these banks have been directed to bolster their cyber security measures to fortify their defences against potential threats.
Strengthening Cyber Security Measures
Advisors within the ministry emphasized the importance of a vigilant approach and readiness to combat future cyber threats. They have been consistently advising banks, in collaboration with the RBI, on the significance of fortifying their cyber security measures, especially with the rapid digitization within the banking sector.
UCO Bank’s Erroneous Credit: The Incident Unfolds
UCO Bank, headquartered in Kolkata, encountered a significant mishap when it mistakenly credited a staggering Rs. 820 crore to several account holders through the Immediate Payment Service (IMPS). This prompted the bank to take immediate action, filing a First Information Report (FIR) with state police and urging a CBI investigation into the matter.
The bank has successfully reclaimed Rs. 649 crore, approximately 79% of the total amount, leaving Rs. 171 crore yet to be recovered. They have undertaken measures to retrieve the remaining sum while also involving law enforcement agencies in the investigation, as disclosed in a stock exchange filing.
Measures Taken and Operational Impact
In response to the glitch, UCO Bank has initiated steps to suspend its IMPS temporarily. Ashani Kumar, MD, and CEO of UCO Bank clarified that while IMPS remains suspended, NEFT and other transactions are still operational. Kumar did not rule out the possibility of either human error or a cyber attack in causing the glitch.
Kumar shed light on the technical aspect, explaining that although senders received a “transaction declined” message, the amount was debited from their account. Simultaneously, the amount was erroneously credited twice – once to the recipient and again to the sender.
The bank has frozen the accounts where the erroneous funds were credited and has alerted all remitting banks. Despite the setback, Kumar expressed relief in reclaiming a significant portion of the funds amidst ongoing festivals. However, the incident caused a 1% dip in UCO Bank’s stock value, closing at Rs. 39.4 on Thursday.
IMPS Details and Recovery Plan
IMPS is an instantaneous interbank electronic funds transfer system integral to the Unified Payments Interface (UPI). The platform permits account-to-account fund transfers with a daily transaction cap of Rs. 5 lakh, incurring transaction charges between Rs. 5 to Rs. 15.
UCO Bank, in its filings, did not specify the timeline for reinstating IMPS services, leaving uncertainty among customers and market observers regarding when the system will be fully functional again.