E-Banking: Basic Features and Creating a Legal Environment in India

I. Introduction

E-Banking in simple words means the provision of banking products and services via electronic channels. E-Banking previously used to be in the form of Automated Teller Machine(ATMs)and telephonic transactions. Now it has been done through a more advanced system of the internet.

According to Daniel “Internet banking or E-banking is the term that signifies and encompasses the entire sphere of technology initiatives that have taken place in the banking industry. E-banking is a generic term for making use of electronic channels through telephone, mobile phones, the internet, etc. for the delivery of banking services and products.²

There has been nothing like e-banking that has revolutionized the whole banking system so rapidly. E-banking has given absolute transparency to the market and the clients can therefore compare the various services of different banking easily and choose their services and banks accordingly.

II. Features of online banking:

The main characteristics of online banking are as follows³:

1. Banking works are done through the world wide web.

2. The geographical barriers disappear as it could provide service at different counters/ jurisdictions.

3. Online Banking provides the customer the facility of banking 24x7 which is very convenient.

4. Features of online banking guarantee security of the transaction, customer’s privacy, and transparency of the transaction.

III. Forms of internet banking

NATIONAL ELECTRONIC FUND TRANSFER[NEFT]⁴:

National Electronic Funds Transfer (NEFT) is a cross-country transaction system interface working with direct fund transfer. Through NEFT, people or any juristic person can electronically move cash from any bank office to any person whether natural or juristic having an account with some other bank office in the nation partaking in the NEFT. Even people who don’t have an account can use the facility of NEFT by depositing cash at NEFT counters in banks but, such money settlements are limited to Rs. 50,000/ – per exchange. NEFT works in hourly clusters – there are twelve settlements from 8 am to 7 pm on weekdays and six settlements from 8 am to 1 pm on Saturdays.

REAL-TIME GROSS SETTLEMENT-RTGS⁵:

RTGS is the continuous (real-time) settlement of money transfers independently on an order basis. ‘Real-time’ signifies that the preparation of guidelines takes place as soon as they are received. ‘Gross Settlement’ means the settlement of the money transfer directions happens separately through guidance. The transaction done through RTGS acts as conclusive proof of transaction. The RTGS has gained significance for its ability of huge amounts of transactions. In RTGS there is no upper limit for the amount to be transferred. The lower limit is 2l lakhs.

IMMEDIATE PAYMENT SERVICES [IMPS]⁶:

IMPS allows the customer to do monetary transactions 24x7 through mobile phones, the world wide web, and ATMs.It is secure and also economical and time-saving.

OBJECTIVES OF IMPS:

The objectives of IMPS are to make payments simple by just using the mobile phone number of the beneficiary

To allow customers to enjoy online banking through mobile phones in a more secure way.

Foundation of Mobile Banking System.

ELECTRONIC CLEARING SYSTEM [ECS]⁷:

ECS is a technique for affecting payment or exchanges regarding the bill payments or check clearing and so on, by an electronic process that does not require the physical handling of papers. All the verifications are done digitally which is a very fast and time-saving instrument.

UNIFIED PAYMENT INTERFACE[UPI]⁸: It is an instantaneous real-time online payment system that allows the instant transfer of funds from one bank account to another. This system is capable of handling transactions from different bank accounts through a single mobile application. The difference between UPI and Internet Banking is that UPI is mainly used to transfer funds (both peer-to-peer and merchant payments) using the various mobile applications offering this service. Whereas, Internet Banking offers fund-transfer services along with other banking options like loan applications, credit card applications, and opening of fixed deposit accounts

IV. Indian Perspective of E-Banking:

The Legal aspect of the Indian Banking System is governed by the following set of statutes which are as follows⁹:

1. The Banking Regulation Act, 1949

2. The Reserve Bank of India (RBI) Act, 1934

3. Foreign Exchange Management Act, 1999

4. Indian Evidence Act, 1872

5. Indian Contract Act, 1872

6. Information and Technology (IT) Act, 2000

7. Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI) Act, 2002

8. Negotiable Instruments Act, 1881

Provisions under INFORMATION TECHNOLOGY ACT, 2000.

The IT Act has put all electronic information in the Bankers Book Evidence Act 1891 which will be recognized as conclusive proof in a court of law. It has also allowed the Central Board, which has been established by the Reserve Bank of India, to support all types of electronic monetary transactions and other features, of The Reserve Bank of India Act, 1934, and guidelines provided by RBI.

1. According to Section 43A of the INFORMATION TECHNOLOGY Act,2000¹⁰ gives that any, a person whether an individual or juristic person will be liable if there is any loss of information or data which is being handled by that person, whether negligently or purposefully is irrelevant and proper and reasonable security has been taken by him is to be proved by him and this wrongful loss or wrongful gain by that person has to be compensated in the form of damages.

2. Again under Section 72A of the Information Technology Act, 2000,¹¹ Disclosure of sensitive and personal data without the information of the person concerned by any intermediary who has got the information by a lawful contract which on disclosure causes wrongful loss or gain of the person who has entered into the contract, then such intermediary shall be punished with imprisonment for a term which may extend to three years, or with fine which may extend to five lakh rupees, or with both.

3. Section 66-B¹² talks about punishment for dishonestly receiving stolen computer resources or communication device-It says that whoever receives any electronic device dishonestly or steals it, shall be punished with imprisonment of either description for a term which may extend to three years or with a fine which may extend to rupees one lakh or with both.

4. Section 66-C¹³ punishment for identity theft- Whoever, fraudulently or dishonestly, uses the credentials of any other person shall be punished with imprisonment of either description for a term which may extend to three years and shall also be liable to a fine with may extend to rupees one lakh.

5. Section 66-D¹⁴ punishment for cheating by personation by using computer resources- Whoever impersonates any other person on any digital platform with an intent of cheating, shall be punished with imprisonment of either description for a term which may extend to three years and shall also be liable to fine which may extend to one lakh rupees.

6. Section 85¹⁵ -offenses by companies-This section talk about punishment for contravention of any provision or rules of the IT Act by any company and it’s the company on whom the burden of proof is there to show that it has taken all due diligence during its performance by the Act. Also if it has been found that the director or any other officer whose negligence has resulted in the contravention then he or she will be individually liable and tried by the law.

Digital Signature which has been incorporated by the IT Act 2000, is a powerful part of Online Banking. This is the medium by which the IT Act, of 2000 is connected with the Online banking sector and gives a lawful system in such a manner.

Provisions of Indian Penal Code, 1860

The main provisions relating to dealing with the E-Banking Frauds in India are as follows¹⁶:

• Section 383¹⁷: Punishment of Extortion- Whoever tries to extort money from a person by threatening him that he will defame him by posting certain material or articles about him on the internet can be punished either by imprisonment for 3 years or fine or both.
• Section 379¹⁸: Punishment of Theft- Whoever tries to steal any movable property which also can be an electronic record can be punished with imprisonment which may extend to three years or with a fine or both.
• Section 406¹⁹: Punishment of Criminal Breach of Trust- Whoever dishonestly misappropriates any movable property under which any electronic device and record will fall, does so for his wrongful gain or loss shall be punished with imprisonment which may extend to three years or with a fine or both.
• Section 416 & 417²⁰:Cheating by personation and Punishment of Cheating- Whoever impersonates another person intentionally to cheat, and causes wrongful losses to the person whom he has impersonated, or any other person, shall be punished with imprisonment which may extend to one year, or fine or both.
• Section 471²¹: Using as genuine a forged document or electronic record- Whoever does fraud by using a forged document in place of a genuine document,(here electronic documents are also allowed) shall be punished with imprisonment which may extend to two years or fine, or with both.
• Section 500²²: Punishment of Defamation- Whoever intentionally publishes a defamatory picture, word, article, against any person, whether a natural or juristic person, which will lower the reputation of the person in front of the public at large, shall be punished with imprisonment which may extend to two years or fine or with both.
• Section 506 and 507²³: Punishment of Criminal Intimidation- Where persons threaten another person by any electronic means which makes him do any illegal thing or stops him from doing any legal work which will cause him harm or give an apprehension of death or grievous hurt and shall be punished with imprisonment which may extend to seven years for the apprehension of death and two years for criminal intimidation by an anonymous communication, or fine or both.

INDIAN EVIDENCE ACT,1872

• Section 3²⁴ of the act defines evidence. Here the act now recognizes electronic document as evidence and the words in the electronic document are now considered to be statements in the eyes of the law
• ²⁵ Section 17 which defines what is admission also now considered electronic documents which are relevant to be admitted.
• n Section 34 of the act stated that all the states in the books of the account even electronic account books and documents will be relevant whenever the court thinks but the document itself is not enough to prove a person liable.²⁶
• Section 47 A²⁷ - Electronic Signature which is certified by an authentic authority is also a relevant document under this act.
• Section 65-B²⁸ laid down the procedure of admissibility of electronic records as evidence in the court of law.

ADVANTAGES OF E-BANKING²⁹

1. Easy Accessibility: The best part of online banking is that it is easily accessible just from the comfort of your home through the use of the internet and the customers can avail of many transactional and nontransactional facilities like rtgs or checkbook ordering.

2. Economical: Internet Banking is the new marketing way of banks through which they are saving on space in offices and the service provider are less required for one-to-one customer interaction and also provides low rates for online loan applications and other facilities thus being economical for the bank.

3. Services: In the world of online banking the banks are providing a host of services starting from account balance checking to loan and EMI calculators and even Income Tax return forms and facilities.

4. Eco-friendly: Online banking has helped a lot in cutting down the hardcopy paper workload which in a way is a very good way to save trees and bring a change for the environment and sustainable development the future generations.

DISADVANTAGES OF INTERNET BANKING³⁰

1. Complex Transactions: Although the world of online banking has been developing in a rapid leap few transactions and problems are always there which cannot be resolved online and need the personal attendance of the customer in the bank.

2. Security: Despite many highly encrypted software and high-security programs there is always a scope of hacking and online scams and phishing and vishing and many more ways of defrauding a person in the online banking system who is not very well acquainted with the system and has a very basic understanding of it. So security is always a big question mark when it comes to the question of online banking.

3. Customer Awareness: Awareness creation is a major challenge that in a way directly affects the security of online banking as the people who are not well acquainted with the system find it very difficult to work and avail of the services of e-banking and there is always a fear for being cheated.
RBI GUIDELINES ON LEGAL ISSUES RELATED TO ONLINE BANKING³¹Considering the criminal function prevalent, there's a duty on the part of banks now no longer most effective to set up the identification however additionally to make eninquiriespproximately integrity and popularity of the potential customer. Therefore, even though the request for starting an account may be ordinary over the Internet, bills have to be opened most effectively after the right advent and bodily verification of the identification of the customer. From a criminal perspective, safety techniques are followed through banks for authenticating customers’ desires to be identified through regulation instead of a signature. In India, the Information Technology Act, 2000, in Section 3(2) presents a selected technology (viz., the uneven crypto device and hash function) as a way of authenticating digital records. Any different technique utilized by banks for authentication has to be identified as a supply of criminal chance. Under the prevailing regime, there's a duty on banks to keep the secrecy and confidentiality of clients’ bills. In the Internet banking situation, the chance of banks now no longer assembly the above duty is excessive as a result of numerous factors. Despite all affordable precautions, banks can be uncovered to have a more suitable chance of legal responsibility to clients as a result of a breach of secrecy, denial of provider, etc., due to hacking/ different technological failures. The banks have to, therefore, institute a good enough chance to manipulate measures to control such risks.

The Consumer Protection Act, of 1986 defines the rights of customers in India and is relevant to banking offerings as well. Currently, the rights and liabilities of clients availing of Internet banking offerings are being decided through bilateral agreements among the banks and clients. Considering the banking exercise and rights loved by clients in conventional banking, banks’ legal responsibility to the clients as a result of the unauthorized switch thru hacking, denial of provider as a result of technological failure, etc. desires to be assessed, and banks presenting Internet banking have to insure themselves towards such risks.

V. Suggestions

1. The banks must be more vigilant and careful while handling e-transactions and minimize errors in them.

2. The ATMs must be weekly checked and monitored and there must be a penalty for banks if they are negligent and are unwilling to provide the facilities to the customer which are available.

3. The banks should always maintain the privacy of their customer.

4. Speedier justice delivery system and alternative customer redressal forums must be set up at every branch.

5. Creation of awareness on the functioning of e-banking and also small refresher workshops must be conducted both for the banker and the customer.

VI. Conclusion

Online Banking has made life easier and transactions are taking place in the blink of an eye but with all the merits of it still security, and reliability is big grey areas. Regulatory bodies and more new statutes and refresher courses for law enforcement officers are required to bring India on the same footing as other western countries. Cyber cells must be more effective and the response from the Police must be proactive then only we will be able to register, investigate, and then provide justice to the victims of cybercrimes. The redressal of victims of Cyber Crime is very poor in India. The Government must bring in experts from the field of cyberlaw to draft new legislation for redressal of victims of cybercrime. One of the major parts of cybercrime is constituted by online transactions. Though the journey is long there is always light at the end of the dark side. On this positive note, I believe India will be one of the greatest cashless economies in the world shortly.

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