Four eyes principles in banking

The four eyes principle is a requirement that two individuals approve some action before it can be taken. The four eyes principle is sometimes called the two-man rule or the two-person rule.

In a business context, the four eyes required for approval are often those of the CEO (Chief Executive Officer) and the CFO (Chief Financial Officer), who must both sign off on any significant business decision. In editing, proofreading and translation, documents typically have a second reader to detect errors and typos that a single pair of eyes might miss. Although neither individual might detect all errors, two readers are likely to miss different things so that, collaboratively, they will catch more mistakes.

Here are a few other examples of the four eyes principle at work:

Many legal and financial documents require the signatures of two individuals.

Banks, casinos and sensitive military areas often include no-lone zones: areas in which two people must be present and within each other's line of vision at all times.

The Emergency War Orders (EWO) safe, which contains missile launch keys and codes, is locked by two padlocks with keys held by different launch officers.

Some data management systems require that important record updates be approved by two separate people before the data is committed.

Although the four eyes principle adds an element of security to any decision-making process, its effectiveness relies upon the ability, integrity and diligence of the individuals involved. In a refinement of the basic principle, a random rotation of authorized individuals serves as the second pair of eyes, so that it cannot be known with any certainty which two individuals will be dealing with a given decision.

Some technological advancement that are gradually making a foray into financial sector:

Some technological advancement that are gradually making a foray into financial sector include big data, artificial intelligence, block chain technology and internet of things. Let me mention a few examples.

1. Banco Santander has expressed its intention to provide secure transactions using voice recognition via its banking app. RBS has trialled “Luvo”, an AI customer service assistance to interact with staff and to potentially serve customers in near future. Japan’s Softbank, in collaboration with Paris-based robotics experts, Aldebaran has developed Pepper, the world’s first humanoid robot. Pepper is already being used in customer services industries as a replacement to an information booth or the welcome desk. Mizuho Financial Group Inc. bank has reportedly introduced Pepper to its flagship branch in Tokyo in 2015 to deal with customer enquiries, while Mitsubishi UFJ Financial Group has tested “Nao”, a humanoid robot to interact with customers. Taking cue from their Japanese counterparts, I understand that HDFC Bank in India is also intending to introduce similar automation via robotics.

2. To buttress the point around increasing reliance on technology in the banking sector in India, following are some statistics. As per the latest RBI Annual Report, the share of electronic transactions in total transactions in volume terms has moved up to 84.4 per cent from 74.6 per cent in the previous year. Likewise in value terms, their share has also inched up to 95.2 per cent from 94.6 per cent. At end-March 2016, the national electronic funds transfer (NEFT) facility was available through 130,013 branches of 172 banks, in addition to business correspondent (BC) outlets. NEFT handled 1.2 billion transactions valued at around Rs.83 trillion (approximately $ 1.3 tn) up from 928 million transactions for Rs.60 trillion (approximately $ 0.9 tn) in the previous year. In March 2016, NEFT processed the highest ever monthly volume of 129 million transactions. Similarly, the internet banking and mobile banking based payments are increasing at a rapid pace.

Udyami Mitra portal

Udyami Mitra portal set up by SIDBI leverages IT architecture of Stand-Up Mitra portal and aims at instilling ease of access to MSMEs’ financial and non-financial service needs. The Portal, as a virtual market place endeavours to provide 'End to End' solutions not only for credit delivery but also for the host of credit-plus services by way of hand holding support, application tracking, multiple interface with stakeholders (i.e. banks, service providers, applicants).RBI wants to  see development of more such technological interfaces in the coming days making it easier for MSME entrepreneurs to borrow from the banking system. RBI is committed to support such initiatives with appropriate safeguards and consumer protection measures.

TReDS--Trade Receivables Discounting System

TReDS: In order to solve the problem of delayed payment to MSMEs, RBI has licensed three entities for operating the Trade Receivables Discounting System (TReDS). The system would facilitate the financing of trade receivables of MSME enterprises from corporate and other buyers, including government departments and public sector undertakings (PSUs) through multiple financiers. The objective is to create Electronic Bill Factoring Exchanges which could electronically accept and settle bills so that MSMEs could encash their receivables without delay. It is expected that the TReDS will commence operations within this current fiscal. It would be important that the use of TReDS is made mandatory for, to begin with corporate and PSUs and later for the Government departments. RBI would urge the Chambers and the MSME Ministry to proactively examine this aspect as success of TReDS initiative can be a game changer for the MSME sector.