Parliamentary panel rejects govt response on cyber fraud, says it fails to plug key gaps

The story

A Parliamentary Standing Committee on Finance has rejected the government's response to tackling cyber-enabled financial fraud, stating that proposed measures are largely procedural and fail to address critical operational gaps. The Department of Financial Services highlighted various existing tools including artificial intelligence systems used by banks, the Reserve Bank of India's MuleHunter system to identify suspected mule accounts, and fraud monitoring solutions for digital transactions. However, the committee found these responses inadequate and insufficient.

The panel identified several key concerns, including inadequate accountability for banks that maintain mule accounts used in fraud schemes. Under the proposed compensation framework, banks would bear only 10 percent of losses while the RBI would bear 65 percent, creating what the committee called a severe moral hazard. Additionally, the committee flagged the failure to address the critical three-to-four-hour window, known as the Golden Hour, during which fraudulent funds could potentially be frozen and recovered. The committee recommended imposing stricter liability on banks and establishing a framework to penalize branches with repeated KYC verification lapses.

Summarized from reporting first published by indiagazette.com. Read the original coverage.