Challenges in the E-Banking Sector in India
The E-banking sector provides essential banking services to the customer through the internet, important development, and transition from the physical banking system in India. Electronic banking has enabled customers to access most of their banking services from a website or an app, within a few seconds. Although the transition to the electronic banking system has been a long one, it has several advantages for a customer and the bank. However, there are several concerns with having an electronic banking system with some of the most important ones being the risk of privacy, security, loss of data and valuable information, and the prospect of hacking.
E-banking refers to a user using their personal device to access the bank’s website to perform essential banking services virtually. In the legal sphere, it denotes an individual using banking services through a computer or a phone. It has been phenomenal in removing geographical barriers to customers since users can access banking services through their devices from any place in the world. However, this has raised several questions about legal jurisdiction and the nature of such transitions. Despite international laws on e-banking, there is a grey area specifically in relation to jurisdictions of the transactions. More importantly, one of the largest concerns of the E-banking sector in India is to those banks who have not responded to this new technology in time, hence posing as a strategic risk inefficiency, delivery mechanisms and user satisfaction.
The Reserve Bank of India regulates the banking sector in India according to the RBI Act. There are various traditional provisions that are applicable to the e-banking sector. However, there has been a need for more regulations and rules to combat the problems faced by this sector. The Reserve Bank of India Act 1934, Banking Regulation Act 1949, Foreign Exchange Management Act 1999 and several more have been the core for the legal framework of the banking system. Under the Foreign Exchange Management Act 1999, non-residential Indians are permitted to have a foreign currency account and borrow from a bank.A key piece of legislation which has attempted to resolve several issues in the e-commerce related issues has been the Information Technology Act 2000. The first online banking platform in India was initiated by ICICI in 1996. The usage of e-banking only increased from 1999 in India, where the government attempted to create a tech friendly environment and companies sought to reduce ISP online charges. The Public Sector Banks, on the other hand, lagged behind in the E-banking race, with the exception of State Bank of India who took the lead to adopt online internet banking practises.
The World Trade Organisation, which India is a signatory too, advocates for liberalization, privatization and globalization. India faces competition from the world to update its technology and meet the pace of e-banking as compared to other countries. Reserve Bank of India set up a committee to examine the various aspects of e-banking primarily focusing on legal issues, technology issues, security and regulatory issues. The group has recommended that banks should use a network administrator and have a technical security policy approved by Directors. They have suggested that banks use logical access controls to applications, software and utilities, which may include using passwords, smart cards, biometric technologies and user IDs. To resolve legal issues, this committee has suggested that all applications of banks should have records for legal purposes, which may be necessary to keep all messages sent and received.
With the advent of E-banking, there are certain rules banks have to fulfil. Firstly, the Tournier case, held that the banker should not disclose any customer's financial position and nature of their transactions to anyone else, since it can harm one’s reputation and business. This has been difficult since hackers can operate and check bank accounts, without banks being able to trace the hacker. The Bank finds about the hackers only after being informed by the customer, hence, to obtain the obligation banks must ensure to strengthen their technology to maintain the secrecy of a user’s account and their privacy. Secondly, banks are under a public duty to produce documents when asked for by the courts. In electronic form, banks must retrieve information in electronic form as it is easier and cheaper and ensures speedier communication. Banks must store documents and reproduce them when required in court. Therefore, banks have to handle electronic documentation and ensure the information is stored and is not washed away due to a virus, or else they are accountable to the law. Thirdly, another legal obligation banks have to strictly follow is to ensure that the signatures provided by customers are verified and are not forged. The law is precise and strict, in the event of a forgery, the law holds the bank liable. The signature is scanned and converted into a digital signature. Banks need to ensure their technology can detect authentication and must record all e-signatures.
For several banks, one of the biggest and largest disadvantages with E-banking is the failure to form a relationship between the banker and the client, user. There are several complex transactions that cannot be sorted out unless the user meets with the banker in person, such as notarization and bank signature verification cannot be done online. Banks also need to advance and include more security measures to protest their customers’ accounts from being hacked. Despite the encryption software, phishing, hacking, identity theft, malware and unauthorized activities are not uncommon on the internet. In the Indian banking scenario, there is less awareness on how to access information and the benefits of internet banking. In case of fraud, RBI rules state that a customer is not required to pay if the act was carried out via a third party. Several authors have suggested while discussing the challenges to E-banking that the Consumer Protection Act should be extended to E-banking in cases of non-compliance with security and the failure of ATM machines.
Conclusively, customers in India are still adjusting to the shift from the traditional banking sector to the E-banking sector. Crimes and fraud that are resulting on electronic platforms require lawmakers and authorities to make severe and strict regulations. The legal challenges to the E-banking sector should be taken more seriously by Banks who advocate for change and by the concerned authorities. Cybersecurity is additionally, an essential requirement to uphold by banks and a user’s privacy while using E-banking services must be protected further.
This article has been Submitted by Sanya Sharma