Co-operative Banks Must Abandon VPN Dependency Now

A wave of ransomware incidents has incapacitated over 300 co-operative banks across India, exposing deep vulnerabilities tied to outdated VPN-based security. These attacks underline the urgent need for a shift towards modern access frameworks such as Zero Trust Network Access.

Operational disruptions began when C-Edge Technologies—a key IT provider to numerous co-operative banks—was targeted by ransomware on 31 July 2024. NPCI responded swiftly by isolating C-Edge from the retail payments network, causing near-total outage across nearly 300 local banks. While the impact was limited to 0.5 per cent of the national payment volume, it underscored the fragility of legacy VPN systems.

Traditional VPNs grant broad network access once connected, enabling attackers who gain entry—via phishing or credential theft—to move freely within the network, a phenomenon aptly dubbed the “fortified castle” syndrome. VPN toxicity is heightened in banking environments reliant on remote access, where excessive trust and poor segmentation amplify risk.

By contrast, Zero Trust Network Access operates under the principle “never trust, always verify.” Rather than granting blanket access, ZTNA authenticates and authorises access on a per-application basis, based on continuous evaluation of user identity, device health, location and behaviour. This approach dramatically reduces the attack surface and limits lateral movement—a key advantage in defending co-operative banking networks.

Speed and user experience also favour ZTNA. Traditional VPNs suffer from performance issues due to centralized routing and backhauling, introducing latency and operational friction. In contrast, ZTNA delivers direct, application-specific access, improving responsiveness while maintaining security.

In many global sectors—including finance—institutions are accelerating adoption of ZTNA. Early deployments of ZTNA also address regulatory expectations, as granular logging, analytics and policy enforcement support compliance needs.

Academic analysis further reinforces this shift. A recent paper proposes a blockchain-integrated Zero Trust framework—leveraging smart contracts, role-based and just-in-time access—to secure fintech ecosystems. Despite a small performance trade-off, the framework offers robust protection against credential theft, insider threats and privilege escalation—risks that plague perimeter-based models like VPNs.

The co-operative banking sector, with its distributed architecture and reliance on third-party providers, faces acute exposure from outdated access models. By adopting ZTNA, banks can ensure every login is verified, every time, replacing fragile VPN tunnels with a secure, policy-driven access layer—no VPN headaches.

The case for transition is clear: ZTNA offers stronger security, streamlined compliance and enhanced user experience. The time for co-operative banks to move beyond VPN dependency is now.