BCT Digital Successfully Navigates RBI’s Regulatory Sandbox Testing with Excellence

Recommended for adoption by regulated entities

rt360 Real Time Monitoring System was able to scan crores of transactions happening at the bank, 24×7, process transactions in seconds, and alert bankers of the suspicious transactions in a matter of milliseconds.

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Summary

BCT Digital’s rt360 Real Time Monitoring System (RTMS) successfully completed the testing phase from among six products shortlisted from many applicants by the Reserve Bank of India as part of the fourth cohort of the regulatory sandbox (RS) themed on ‘Prevention and Mitigation of Financial Frauds’. This stamp of approval from the RBI, one of the most appreciated central banks globally, is a prestigious recognition of the pioneering work done by BCT Digital in the areas of FinTech & RegTech, and is conducive to our expansion to newer products, market segments and geographies. For the Indian banking system, this is a giant leap towards a proactive approach on fraud management and is expected to have a massive positive impact on the bottom line and reputation of banks.

About the client

The client, a major bank headquartered in Asia, commands a substantial asset size of USD 145 billion. With an extensive network comprising 10,800 branches, the bank caters to a staggering 12.5 million customers. The immense operational scope of the bank poses distinctive challenges in efficiently monitoring transactions and mitigating emerging risks.

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Users
3 - 3 months
Phased implementation

Background

In 2022, the RBI invited admissions to the fourth cohort of the regulatory sandbox titled ‘Prevention and Mitigation of Financial Frauds’. Of the nine product applications that it received, six were selected for the test phase, which commenced in February 2023. BCT Digital’s application was for one of its flagship products, the rt360 Real Time Monitoring System. Following extensive assessments of the product against the RBI’s prescribed guidelines, detailed discussions, demos and presentations to the RBI officials, the rt360 Real Time Monitoring System was further selected for the testing phase. In 2024, the rt360 Real Time Monitoring System cleared the testing phase and was deemed eligible for adoption by a wide array of financial institutions including Scheduled Commercial Banks and AIFIs.

Implementation Snapshot

  • Coverage:Assets, Liabilities, Staff a/c, Office a/cs
  • 12.5 million customers
  • 105 million accounts (includes all a/cs)
  • 20 million transactions scanned daily
  • 10800 branches | 75000 users
  • 300 business rules

The challenge

While many banks have already implemented Enterprise Fraud Risk Management (EFRM) systems, these are often focused on channel frauds and transactions that impact the liabilities side (such as CASA accounts). However, the problem of credit frauds, which still account for a significant chunk of overall frauds, remains unaddressed. During FY2020-21 alone, advances-related fraud constituted 98% of overall frauds by value. The RBI wanted to take drastic measures to curtail the quantum of fraud through mechanisms such as real-time monitoring of loan accounts. This is the gap that the rt360 Real Time Monitoring System sought to fill.

In May 2015, the RBI envisaged a framework for red flagging of suspicious accounts for early detection and resolution of frauds. As part of the framework, the RBI prescribed an indicative 42 scenarios, which could point to a possibility of loan fraud. At the time, BCT Digital pioneered its Early Warning System (EWS) – a fully automated product that aligned with the RBI guidelines and compliance requirements. EWS was successfully implemented at Andhra Bank in 2017. Since then, BCT Digital has been continuously striving to strengthen the solution and subsequent versions catered to evolving aspects such as the DFS EASE guidelines and real-time monitoring for all portfolios. This led to the creation of the rt360 Real Time Monitoring System, now an industry-leading product that is live in production in one of the India’s largest banks.

Implementation Snapshot

  • Coverage:Assets, Liabilities, Staff a/c, Office a/cs
  • 12.5 million customers
  • 105 million accounts (includes all a/cs)
  • 20 million transactions scanned daily
  • 10800 branches | 75000 users
  • 300 business rules

The solution

The rt360 Real Time Monitoring System enables financial institutions to use predictive technologies for strengthening their credit and fraud monitoring capabilities. It is scalable and adaptable for all financial institutions under the RBI’s purview and carrying on lending activities (Scheduled Banks, Small Finance Banks, NBFCs & HFCs). It helps banks monitor accounts on multiple parameters, such as fund diversion, end-use of funds, KYC/AML compliance, and mule account monitoring, with configurable, real/near-real-time alerts for proactive/pre-emptive follow-up and action.
Financial entities can expect the following outcomes:
  • Reduced information asymmetry between bank and borrower
  • Instantaneous scrutiny of large value transactions
  • Real-time/near real-time feedback to the institution
  • Integration to external data feeds (such as aggregator feeds)
  • Alerts that can be routed to monitoring teams/call centers for 24/7 monitoring
  • ML for reducing false positives & suspicious transaction identification

To know more about the rt360 Real Time Monitoring System, connect with us.

Sandbox testing

Sandbox testing was carried out with one of BCT’s long standing partner banks following the framework proposed by the RBI. The engagement represented the convergence of three critical parameters: commercial banking knowledge from the bank, technology capabilities from BCT Digital and guidance from the RBI. The broad objective of the testing was to detect suspicious transactions occurring in the bank in real time, and to alert the bankers of the same (again, in real time) so that proactive action could be taken to minimize financial losses. Timely alerts are key to accelerate remedial actions such as freezing of customer accounts.

BCT Digital deployed the rt360 Real Time Monitoring System at the bank in June 2023. A core team comprising representatives from the bank’s business and technology function worked closely on the project along with BCT Digital executives and the RBI officials.

A critical aspect of the sandbox was access to CBS data through a replica/reporting/MIS server or data warehouse in sync with the live CBS instance, for a set of 2,000 customers. Set-up and stabilizing of infrastructure were done from scratch. This included securing management approvals for specific technologies which may not otherwise be used within the bank ecosystem, such as streaming software.

The testing phase covered multiple use cases, including real-time early warning alerts on specific transactions, such as cheque bounces and ad hoc sanctions in near real time basis. It concluded successfully in approximately 4.5 months, in November 2023.

The rt360 Real Time Monitoring System was able to scan crores of transactions happening at the bank, 24×7, process them in just 2-5 minutes of occurrence (depending on scenario complexity), and alert bankers of the suspicious transactions in a matter of milliseconds.

Having met the objectives of the sandbox, BCT Digital secured a successful exit from the RBI regulatory sandbox as per notification dated 18/06/2024. The rt360 Real Time Monitoring System was found viable for adoption by regulated entities.

Implementation Snapshot

  • Coverage:Assets, Liabilities, Staff a/c, Office a/cs
  • 12.5 million customers
  • 105 million accounts (includes all a/cs)
  • 20 million transactions scanned daily
  • 10800 branches | 75000 users
  • 300 business rules

Please click on the RBI Notification and the press release for further reading

Further, the update Master Directions on Fraud Risk Management, released by the RBI in July 2024, emphasizes on the need for real-time monitoring of transactions, which we see as a validation of the rt360 RTMS from India’s leading authority.

Read the RBI notification here.

Awards & Recognition

BCT Digital ranks in Chartis RiskTech100 2024 report for third consecutive year
BCT Digital ranks in Chartis RiskTech100 2024 report for third consecutive year
BCT Digital ranked again among top 100 RiskTech companies by Chartis Research
BCT Digital ranked again among top 100 RiskTech companies by Chartis Research
RiskTech
BCT Digital ranks among
Chartis Research’s top 100 RiskTech companies 2022
Chartis _RiskTech
Rising star of the year at the
RiskTech100 2021
Game changer
FinTech Innovator of the Year 2019
Ciso_Leader_ship
Overall Risk Management Solution
Provider of the year 2019
business-steeves
Innovation of the year at the Stevies International Business Awards 2019
Disruptive
Best FinTech Solution of the Year
technovit
TECHNOVITI 2020 award for
rt360 Early Warning System by Banking Frontiers
entrepreneur
Most Enterprising
business of the year 2021
exellence-award
Best Technology Innovator of the Year Award for rt360 Early Warning System 2020
fintex
Finalist for Fintech Scaleup
of the year 2020
risk management suite

rt360 is a risk management product suite to manage the entire risk portfolio of banks and financial institutions that includes credit risk, capital allocation, pricing risk, liquidity risk, model risk and operational risk.

rt360 is designed by bankers, risk practitioners and technology specialists with a Business First, Technology Next approach, empowering banks and financial institutions to focus on their credit growth and profitability while managing their risks. The product is fully designed and made in India to address the complexities of the financial sector globally. The suite comprises of five distinct products to manage each of the risk portfolio.

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