Preventive Vigilance In Banks

By Rakhi Bhargava

The word vigilance means being watchful and cautious to detect danger, being awake and alert. Vigilance is though important in all parts of life it becomes more pertinent and vertical in financial sector like bank. This is because banks deal with public money.

Banks which are acting as intermediary between depositors and borrowers, have to maintain and observe higher standards of safety to ensure that depositor’s money end use should be same and not diverted. To achieve this bankers not only need to use due diligence on the customers but also required to put additional safeguard measures to check that the transactions are done as per laid down procedures by bank and regular authorities by staff. The care and caution enforced by vigilance is required for ensuring of public money which bank is holding in fiduciary capacity and not allowed to misuse.

There are mainly three types of vigilance in banks which are 1) preventive 2) detective 3) punitive vigilance.

1. Preventive vigilance: This vigilance plays an important role in organizing and set up of systems and procedures to restrain the cuts of wrong doing and misconduct in various areas.

2. Detective vigilance: effective use and searing of complaints. Various audits and inspection reports. Detection of corruption and malpractices. Negligence. Misconduct and better surveillance of public contact points. Close watch and more control over officers and insensitive ports whose integrity is doubtful and decision made by them has to be more precisely scrutinized.

3. Punitive vigilance: includes collection of evidences, investigation and time bound departmental enquiries with retirent action.

Main aim of vigilance in banks:

Vigilance in particular the preventive one is aimed at reducing the frequencies and occurrence of lapses (violation rule law norms and regulation) the main target of detective vigilance is identifying and determination of lapses. Detective and punitive vigilances are strategic components. The larger / higher quantum of punishment is important and fruitful if it detects. In reverse vitiation high penalty is also not useful if the detection is poor / negligible.

The overall responsibility for vigilance work is RBI done by CVL cell and administrates the same over banking industry. This will coordinate between central vigilance commission and CBI. Vigilance mainly issued instruction for greater transparency promoting honest culture and ethical standards in public life. RBI regularly takes various provisions for the same.

The main factors of preventive vigilance are 1) strict adherence to integrity by all employees and bank norms, policies and frameworks to protect the interest of the bank. 2) Restrain the misconduct in various areas of functioning 3) exercising extra due diligence by all employees for preventing unwanted and untoward incidents.

Preventive vigilance is also required in EBT (electronic bank transaction) as in today’s digital era we cannot stop or imagine without electronic transactions but it also gives scope for untoward incidents. Phishing attacks or data theft is one major challenge as on date. Phishing is a type of social engineering attack often used to steal user data credentials or other sensitive details. This is done by sending fake links looking and pertaining like real ones to users and if they type in their sensitive data, it is captured by fraudsters and frauds are committed. Sometime they call / send links / sms for sharing PIN/OTP/CVV and if shared by users unauthorized purchases are made stealing of funds and identity theft (perpetrators)

This requires steps to be taken by both users and enterprises. A spoofed message often contains subtitles error which can be detected by minor attention and also for enterprises numerous number of steps like two factor authentication, strict password/ user creation rules and importance should be given to spread awareness at all levels.

In case any organization failed either in general banking space or in EBT transaction arena and succumbs to losses in addition to declined market share and might escalate into a security incident from which a business will have a difficult time to recover.

As an old saying goes in medical science that “prevention is better than cure” so this also applies on banking operation also and prevention of fraud is much better and cost effective than detect and punish the culprits. Every level and employee of each organization should allow the existing laid down procedures and norms to be significant in every action (tasks done by him and towards him, so he/she should not become part of untoward incidents and the aim of corruption free and high moral with ethical standards can be achieved.

By Rakhi Bhargava