Former SBI chairperson Rajnish Kumar on Friday said that banks need to level up their vendor supervision, particularly in connection with selecting vendors supplying external devices such as PoS (point of sales) machines.

His concerns come amid the recent instance of remotely triggered pager device explosions in Lebanon.

A PoS machine, also known as a PoS terminal, is a portable device used by businesses to accept payments, complete sales and reconcile the payment made with the bill.

“Technology brings advantages but also brings challenges. While data and cybersecurity is a big risk, a new risk has emerged with what has happened a few days ago,” said Kumar, who in September 2023 was announced as the chairman of Mastercard India.

He recollected his experience as a banker during the demonetisation period in 2016 when the government was pushing for rapid deployment of PoS machines to encourage digital transactions.

“I had said then that it takes time. The awareness was not there that when we put a PoS machine, we have to do a thorough security check. After seeing the events which happened a few days ago, banks will have to rethink their entire strategy of vendor certification and procurement,” Kumar said.

“If we are putting in millions of devices in the country as a part of the network, this is a new threat that banks will have to take into consideration,” he said while speaking at a seminar organised by the CII in Calcutta.

Bankers concurred with Kumar’s views. “The outsourcing risk is very high. We do the due diligence not only of the company (PoS supplier) but also the manpower and the team,” Ashwani Kumar, MD and CEO, Uco Bank told The Telegraph.

“Vendor risk assessment has gained momentum in the last 3-4 years in a significant way and every bank, including our bank, has put in a very stringent process to empanel vendors,” he said adding that more could be done to enhance the supervision.

Chandra Shekhar Ghosh, former MD and CEO of Bandhan Bank, said that more supervision can be done by the banks in the light of the emerging threats.

Highlighting another challenge, Rajnish Kumar said that large corporates that are big on fossil fuels and hydrocarbons are also expanding in the renewable energy sector. However, it is a dilemma for the banks in India to undertake selective financing of the renewable projects while avoiding the traditional businesses of these conglomerates.