The RBI had, on November 25, 2016, issued a confidential circular to banks on ‘Cyber Security Controls Frauds‘. The circular advised banks to explore STP (Straight Through Processing) between CBS (Core Banking System) and SWIFT (Society for Worldwide Interbank Financial Telecommunication) messaging systems.
It also spoke on trade finance transactions and the misuse of SWIFT, a fund transferring interface and sent this information in a password protected form to PNB.
In January 2018, RBI allegedly received multiple Fraud Monitoring Reports (FMR) and discovered that PNB had falsely stated to the RBI that it had integrated all applications around CBS with Straight Through Processing. The FMRs purportedly revealed that the modus operandi of this ₹13,000 crores scam was that CBS was not integrated with SWIFT through STP.
Following this, a show cause notice was sent by the RBI to PNB on August 23, 2018 asking them to show cause in writing as to why penalty under Section 47 A(1) (C) read with Section 46(4) of the Banking Regulation Act 1949 should not be imposed on PNB.
The RBI then filed a criminal complaint before the Patiala House Metro Magistrate seeking prosecution of PNB and its officials for commission of offences under Section 46 of Banking Regulation Act read with Section 120B of Indian Penal Code.
After a hearing took place in relation to the show cause notice, in December 2018 the Committee of Executive Directors of RBI passed an order under Section 47A of Banking…
