The RBI’s cyber audit, along with the investigation conducted by the Hyderabad Police, identified significant lapses in the bank’s security measures.
The Reserve Bank of India (RBI) has penalised AP Mahesh Co-operative Urban Bank, based in Hyderabad, with a fine of Rs 65 lakh. The penalty was imposed due to the bank’s non-compliance with the provisions of the Cyber Security Framework for Primary (Urban) cooperative banks. The RBI’s cyber audit, along with the investigation conducted by the Hyderabad Police, identified significant lapses in the bank’s security measures. These lapses resulted in a breach where hackers gained access to the bank’s systems through phishing emails and fraudulently transferred Rs 12.48 crore in January 2022.
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This breach marks the first instance where such action has been taken against a bank. The release from the Hyderabad Police emphasises the importance of all banks adhering to cybersecurity practices to prevent the loss of public funds and vital data. In the case of AP Mahesh Co-operative Urban Bank, the cyber fraud incident was reported, leading to a police investigation.
The criminals executed the fraud through a series of phishing emails, skillfully disguised and sent to bank employees. Opening these malicious emails resulted in the compromise of the employees’ systems, granting the fraudsters full access to the bank’s network.
As part of the investigation, the police have made several arrests, including Nigerian nationals, in connection with the case. The Hyderabad Police stated that the investigation has revealed negligence on the part of the bank, evident from its failure to implement essential cybersecurity measures mandated by the RBI. The bank was found to be lacking crucial components such as an Anti Phishing application, Intrusion Prevention and Detection Systems and Real-time Threat Defense and Management Systems. These components are vital for safeguarding the cyber landscape in the banking sector.
The Hyderabad Police Commissioner, CV Anand, corresponded with the RBI Governor, bringing attention to the significant lapses and requesting the suspension of the bank’s licence to operate due to the serious nature of the breaches and the negligence displayed in implementing necessary cybersecurity measures.
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The existing legal framework did not provide for the filing of criminal negligence charges against the bank management, as stated in the release. However, despite this limitation, the Hyderabad City Police continued their investigation into the matter. As a result, the RBI imposed a monetary penalty of Rs 65 lakh on AP Mahesh Co-operative Bank. While criminal charges were not pursued, the monetary penalty serves as a consequence of the bank’s shortcomings in implementing appropriate cybersecurity measures.
