Sunday, September 20, 2009

Online Banking in India



The concept of online banking was first brought in when the Governor, Reserve Bank of India appointed a Committee under Shri W.S.Saraf, Executive Director to look into technological issues relating to payment system and to make recommendations for widening the use of modern technology in the banking industry. The Saraf Committee recommended institution of Electronic Funds Transfer Systems in India. It also reviewed the telecommunication system like use of BANKNET and optimum utilization of SWIFT by the banks in India. The Shere Committee in 1995 had recommended framing of RBI (EFT System) Regulations under Section 58 of the Reserve Bank of India Act 1934 (RBI Act), amendments to the RBI Act and to the Bankers' Books Evidence Act,
1891 as short term measures and enacting of a few new Acts such as the
Electronic Funds Transfer Act, the Computer Misuse and Data Protection

Impact of the Information and Technology Act, 2000:

The information and technology act is an act to provide legal recognition for transactions carried out by means of electronic data interchange and other means of electronic
communication commonly referred to as "electronic commerce".

Reasons for adopting the online banking:

The growth of online banking has been fuelled by broadband availability as well as secures connections over the Internet. Many banks now offer some form of online banking activity, whether it is checking bank balance, paying bills online or even simple cash transfer transactions. As customers gain more confidence in carrying out secure transactions over the Internet, vulnerabilities are present and can be exploited by cyber criminals to obtain a user's personal banking details. In one of the latest developments, FSecure, a leading security provider for Internet and mobile networks, has issued a warning against computer users of an upsurge in attacks against banking sites, targeting personal user data. It started with software that was capable of retrieving the data typed into the computer keyboard and then more complex mechanisms arrived on the scene such as Phishing and pharming. .

A new concept of cell phone banking has taken over the Indians. A classic example of this is that the Harsh Vihar slum may not have banks, but it does have cell phone coverage. And that has made its residents ideal candidates for a novel experiment in combining microfinance and mobile banking. Basix, an organization that specializes in bringing micro loans and other financial services to India's poor, has teamed up with Axis, an Indian commercial bank, to begin offering accounts to workers in Delhi's slums. Its approach relies on a combination of high technology and old-fashioned shoe leather.

The main risk of online banking is the security concerns. For this the IT Act has a provision, Section 3(2) which, provides for a particular asymmetric crypto system and function as a means of authenticating electronic record. Any other method used by banks for authentication should be recognized as a source of legal risk.

The provisions for the offences committed:

Under the chapter IX Section 43 , the punishments for the offences so caused are defined. By this act under chapter X, Section 48 defines the establishment of a cyber appellate tribunal. . But there is one fundamental difficulty in punishing the cyber criminals. It is the matter of jurisdiction . This is because any person who possesses a computer and an internet can commit this crime and it is practically impossible to trace the person out. Even if the person can be traced, there is no geographical border to bring him under the jurisdiction of a particular country. However the banking regulatory body, RBI has issued a guideline dated 14th June, 2001, which discusses issues pertaining to his territorial jurisdiction within which the internet banking products can be made

Benefits of Online Banking:

Internet-only deals have cornered the best-buy savings market. Rates are, on average, 0.2 percentage points higher than on traditional accounts. For instance, Bradford & Bingley pays 6.4 per cent on its Internet Saver account but only 6.2 per cent on its My Time Postal Saver.
The online savings trend has also allowed lesser-known banks into the market. For instance, ICICI Bank, the second-largest bank in India, offers an internet account paying a competitive 6.41 per cent. There are no restrictions on withdrawals, a low minimum of £ 1 and a guarantee that it will pay 0.3 points above the Bank of England base rate until December 31, 2011.

By : Barnik Ghosh
First Year
Gujarat National Law University
Contact numbers: 09924509380/03324157023

In particular and without prejudice to the generality of the foregoing provision, such regulations may provide for all or any of the following matters, namely:-- 4
* (f) the manner in which the business of the Central Board shall be transacted, and the procedure to be followed at meetings thereof;
(g) the conduct of business of Local Boards and the delegation to such Boards of powers and functions;
(h) the delegation of powers and functions of the Central Board 6**** to Deputy Governors, Directors or officers of the Bank;
(i) the formation of Committees of the Central Board, the delegation of powers and functions of the Central Board to such Committees, and the conduct of business in such Committees;
(j) the constitution and management of staff and superannuation funds for the officers and servants of the Bank;
(k) the manner and form in which contracts binding on the Bank may be executed;

1. Subs. by Act 19 of 1957, s. 5, for "Indian Companies Act, 1913". 2. Subs. by the M. O. 1937, for "he may direct". Sub-section (2) was rep. by Act 62 of 1948, s. 7 and Sch. (w.e.f. 1-1-1949). 4. Ins. by Act 66 of 1988, s. 6 (w.e.f. 30-12-1988). 5. Cls. (a) to (e) was rep. by 62 of 1948, s. 7 and Sch. (w.e.f. 1-1-1949).

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