Bug in UPI app costs Bank of Maharashtra Rs25 crore

NPCI (National Payment Corporation) said Rs25 crore has been moved out of Bank of Maharashtra (BoM) accounts due to a bug in its UPI application. All the corrective steps have been initiated and the process of recovering the money from 19 banks where it was transferred to, is on, it said.
 
"Total amount of loss, as reported by BoM (Bank of Maharashtra), is about Rs25 crore. They have recovered some amount and some amount is still pending. They have filed a police complaint also and the investigation is on," National Payment Corporation managing director and chief executive AP Hota told reporters.
 
Explaining the fraud, Hota said BoM had procured a Unified Payment Interface (UPI) solution from a vendor (reported to be city-based InfrasoftTech) which had a bug that resulted in the fund moving out of the accounts without the sender's account having the necessary funds.
 
"Even if the core banking has declined a transaction, the UPI at the bank-level used to send a success message to NPCI. At NPCI, even if the CBS said no, based on UPI of the bank, we used to do the clearing and settlement," Hota said, adding the fraud was first reported to it on February 22.
 
He said about 50-60 people in Aurangabad discovered this loophole possibly through trial and error method. "They have collected a good deal of money. They have accounts in 19 other banks. They are trying to recover money now," he said.
There were three other banks, including Bank of India, which had bought a similar solution from the same vendor but they've not reported any mishap, Hota said, adding thorough checks have been carried out.
 
The fraud was first reported in the media last week after a few arrests in Maharashtra, but the total amount transferred was under Rs2 crore.
It can be noted that breach of card details due to a compromise at Hitachi's end last year, which led to a replacement of 3.2 million debit cards, had a financial loss of under Rs2 crore.
 
Maintaining that it is up to BoM to take action on its vendor, Hota said NPCI has learnt a lot from this episode.
 
"The learning from this is that we are not allowing any bank to join UPI unless they have a thorough reconciliation process and audited their package by the best of auditors."

User

  Loading...
  Loading...

To continue


Please
Sign Up or Sign In
with

Email

We are listening!

Solve the equation and enter in the Captcha field.

Changes in Our Business Model
 
 
25th Sept 2020
 
Greetings from Moneylife Advisory Services
 
Between financial years 2019-21, SEBI has come up with extensive changes to investor advisor regulations. On Sep 23, 2020, SEBI had issued new additional guidelines. This comes just two months after extensive changes announced in July 2020. Earlier, in December 2019 there was an ad hoc circular
 
As a result of these changes, IAs, cannot accept fees through credit cards, will have to sign a 26-clause investor agreement, have to maintain physical record written & signed by client, telephone recording, emails, SMS messages and any other legally verifiable record for five years. IAs were already asked to record the suitability and rationale for every piece of advice given, sign them and store them for five years.
 
While these extensive and frequent changes, designed to strengthen the conduct of IAs are well-meaning, these have sharply increased compliance efforts and cost. We, being online advisors, find many of changes harder to implement, compared to advisors working in the physical space. We will have to have an army of advisors, administrative and tech staff to be compliant. If we do this, we will have to divert money to these areas and the cost of our service will double. We want to remain the least-cost service in the market to benefit more and more people. In the circumstances, we are forced to change our business model from “advisory” to “research”. This will mean the following:
 
What remains the same:
  • Recommendations on insurance, investment and Lion stocks, will continue as a part of the MAS premium subscription. Our strength has always been research and this will remain available to you through our recommendations.
  • The magazine and all textual content will remain as part of the service
  • We will have to suspend the restructuring tool.
 
What changes:
  • The interactions in Ask / Handholding will offer investment advice but not specific to your situation. It will offer information on investment products and also clarify your doubts about various financial products. It will be a forum for information, not for advice. This will be implemented with immediate effect and our guidelines in Ask, reflect this now.
 
Over the next few weeks our site and our communication to you will reflect these and other additional changes.
 
We feel this will not affect you much in terms of what really matters in investing: knowing what to buy and when to buy. This is our edge and it will still be available to you.
 
img
Debashis Basu
Founder