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E-BANKING AND RECENT TRENDS IN INDIA BY: VIDYA BABAN SAID
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E-BANKING AND RECENT TRENDS IN INDIA
AUTHORED BY: VIDYA BABAN SAID.
LLM, II - Semester IV.
(2022-23)
ABSTRACT
The banking sector plays a vital
role in the development of one country’s economy. The growth of banking sector depends upon the
services provided by them to the customers in various aspects. The growing trend of banking services is found
significant after the new economic reforms
in India. Today, India has a fairly well-developed banking system with
different classes of banks – public sector banks, foreign banks, private sector banks – both old and new generation,
regional rural banks and co-operative banks with the Reserve Bank of India as
the fountain Head of the system.
Nowadays banking sector acts as a backbone of Indian economy which reflects as a supporter
during the period of boom and recession. From 1991 various
trends and developments in banking sector
are credited. It also reflects
the various reforms
were caused to improve
their services to satisfy the customers.[1]
Key Words: Banking sector,
recent trends and developments etc.
INTRODUCTION –
The development and the increasing progress experienced in the Information & Communication
Technology coupled with the expansion of the global economy paved the way for the transformation of the Indian
banking system’s role from traditional trade financing to mobilizing and channelling financial
resources more effectively in almost all facets of life. Intense competitive environment, changing business environments, globalization and the advancement of ICT are the important
factors that have forced Banking and Financial
services to change. Customers
are also demanding greater convenience and accessibility as reflected in longer branch opening hours and an
increase in the choice of delivery mechanism. Therefore, with the passing of the traditional banking sector to electronic
banking, new strategies have become
necessary in order to attract new and retain existing customers. Banks are the
main stimulus of the economic
progress to play a vital role in spearheading the economic development of the nation.
Banking through electronic channels
has gained increasing popularity in recent years. This system, popularly known as ‘e-banking’, provides alternatives for faster delivery
of banking services i.e. offering, supplying and delivering
banking products and services to a wide
range of customers at their office or
home through various electronic delivery channels via electronic devices. It is a generic term encompassing
internet banking, telephone banking, mobile banking etc. It provides lot of benefits which add value to customers’ satisfaction
and to reach out consumers through
many routes in terms of better quality of service offerings such as ATMs, telephone, internet and wireless channels
which are now available to the consumers to perform their banking transactions in addition to the traditional branch
banking and at the same time enables the banks gain more advantage
over other competitors.[2]
What
Is E-Banking?
The simple way to define the
E-banking is banking through the means of internet. Through e- banking customer can access his account through
his mobile phone or computer. It
includes fund transfer to another
bank or within the same, any investment, and account related
details or to avail any
services all through the means of internet. Previously, the customers had to
stand in a long queue to avail of
the bank transaction. In fact, customers were ignorant about the services or the products of the banks. But
today, by just one click we can avail of the easily transfer the funds and manage our accounts.
Objective Of Study
? To examine recent trends and developments in banking sector.
? To
present the technological developments in Indian banking sector.
? To study the emerging trends in banking technology.
Need
Of E-Banking?
·
With the help of e-banking, the customer can operate his account remotely
from his office
or home.
·
It lends
an added advantage towards payment of utility bills
and also eliminates the need to stand in long queues for the purpose of bill payment.
·
Sharp growth in credit card/debit card usage can be majorly attributed to e-banking. A customer can shop globally
without any need for carrying paper currency
with him.
·
By the help of e-banking facilities, banks are now available 24×7 and are just a mouse click away.
·
The rise of e-banking
has made the banks more competitive and resulted in opening of better prospects
and avenues for banking operations.
Importance Of E-Banking
1. The
customer can easily get access to his accounts anywhere
and anytime.
2. The
transaction is safer and secure.
3. E-banking transaction is easier and quicker.
4. It saves the valuable time of the customer.
5. It
has also reduced paperwork. It’s more eco-friendly.
Recent Trends And Developments In Banking Sector Today
we are having a fairly
well-developed banking system with different classes of banks – public sector banks, foreign banks, private
sector banks, regional rural banks and co-operative banks. The Reserve Bank of India (RBI) is at the paramount of all the banks. The RBI’s most important goal is to maintain monetary stability (moderate and stable
inflation) in India. The RBI uses monetary
policy to maintain price stability and an adequate flow of credit. The rates
used by RBI to achieve the bank rate,
repo rate, reverse repo rate and the cash reserve ratio. Reducing inflation has been one of the
most important goals for some
time. Growth and diversification in banking
sector has transcended limits all over the world.
In 1991, the Government opened
the doors for foreign banks to start their operations in India and
provide their wide range of facilities, thereby
providing a strong competition to the domestic
banks, and helping
the customers in availing the best of the services.
The Reserve Bank in its bid to move towards the
best international banking
practices will further
sharpen the prudential norms and strengthen its supervisor mechanism. There has been considerable
innovation and diversification in the business
of major commercial banks. Some of them have engaged in the areas of consumer credit,
credit cards, merchant
banking, internet and phone banking,
leasing, mutual funds
etc. A few banks have
already set up subsidiaries for merchant banking, leasing and mutual funds and many
more are in the process of doing
so. Some banks have commenced
factoring business.
Indian Banking Sector:
Indian banking sector can be majorly
divided into three
sections.
Phase I – This is from 1786 to 1969 and it
was the initial phase of the banking. So, in this phase, many small banks were set up.
Phase II – This phase
can be considered from 1969 to 1991 where regularization, nationalization, and growth
of banks comes into the picture.
Phase III – This phase is from 1991 onwards
and it consists of liberalization and it’s after effects.
Trends In Banking:
In recent years, there have been many
changes in the banking industry. These trends in banking have made the whole process
of banking very easy. These trends include
the following:
RTGS – Real Time Gross Settlement:
|
5
|
E-cheques:
This technology has been developed
in the US which will replace the conventional paper cheques in India. Thus, to include
this method of E-cheque and make it mandatory, a negotiable instruments act has been included in the amendment.
Electronic Clearing Service:
ECS is an electronic system that
is used to make the payments and receipts that are in bulk. The payments need to be similar in nature
which can be smaller in amount and repetitive in nature. Thus, this facility is specifically beneficial to government agencies
and companies that make or receive large bulk payments.
EFT – Electoral Funds Transfer:
This is a system to transfer the
money from one’s bank account to other accounts. So, in this system, the concerning party that wants to
make the payment instructs the bank and make a cash payment or authorizes the bank to transfer the funds directly.
So, the sender should provide the bank with the complete
details like the name of the receiver, account type, account
number of the respective
bank, city name, branch name, and other details to the bank. Thus, it will
ensure that the amount reaches the beneficiaries account
quickly and correctly.
ATM – Automatic Teller Machine:
This is the most popular method
in India to withdraw the money. The customers can enable this service to withdraw the money 24 by 7. It
allows the customers to perform all day-to-day bank activities without interacting with any humans. Furthermore,
these facilities are also used for the payment
of funds, utility bills, etc. The other trends in the banking sector include a
point-of-sale terminal, telebanking, and electronic data interchange.
Advantages Of Internet
Banking:[3]
Convenience:
This is the single most important benefits that outweigh any shortcoming of internet banking. Making transactions and payments right from the comfort of home or office at the click of a button without even
having to step out is a facility none would like to forego. Keeping a track of accounts through the
internet is much faster and convenient as compared to going to the bank for the same. Even non transactional
facilities like ordering cheque books online, updating
accounts, enquiring about interest rates of various
financial products etc become much simpler on the internet.
2.
Better Rates: The banks stand to gain significantly by the use of internet banking as
it implies lesser physical effort
from their end. The need to acquire larger spaces for offices and employ more staff to deal with the
customers is significantly reduced making it financially beneficial to the banks. This means that a portion of savings
accrued can be passed on to the customers
in terms of higher rates on deposits and lower rates on loans. To encourage
internet banking most banks, offer
minimum or no deposit accounts for online banking and lower penalties
on early withdrawal of Fixed
Deposits.
3. Services: Technology has made it extremely
convenient for the bank as well as the customer to access to a host of wonderful services by simply logging in.
These services include financial planning
capabilities, functional budgeting and forecasting tools, loan calculators,
investment analysis tools and equity
trading platforms which are available as simple applications on the bank’s website. Additionally, most banks
also provide the facility of online tax forms and tax preparation.
4.
Mobility: Internet banking has a step further in the last few years in the form of
mobile internet banking
which accords unlimited
mobility to the customer who can now handle financial
transactions even while on the move.
5. Environment friendly: Another important
benefit of the concept of internet banking is that it is good for the environment as it cuts down the usage of paper, reduces pollution as people do not have to travel physically and also does not add emissions. However the current
trend of exclusively using the online
mode to make all kinds
of transactions has a few pitfalls which
may prove costly in the long run unless guarded against from the beginning.
Disadvantages Of Internet Banking[4]
1. Relationships: Online transactions take a toll on
the relationship with the banker which the traditional
visit to the branch office used to foster. Personal relationship with the staff
at the banks comes handy when
requesting for faster loan approval or a special service which may not be available to the public. The
manager has many discretionary powers such as waiving of penal interest or service fees which were often taken advantage
of by better acquaintance with the
staff. Additionally personal contact also meant that the banker would provide
essential financial advice and insights
which are beneficial to the customer.
2.
Complex Transactions: There are many complex transactions which cannot be sorted out unless there is a face-to-face discussion
with the manager that is not possible through internet banking. Solving specific issues and complaints requires
physical visit to the bank
and cannot be achieved through
the internet. Online communication is neither clear nor pin pointed to help resolve
many complex service
issues. Certain services
such as the notarization and bank signature
guarantee cannot be accomplished online.
3. Security: This is the biggest pitfall of the
internet banking scheme which needs to be guarded against by the common customer. Despite the host of
sophisticated encryption software is designed
to protect your account there is always a scope of hacking by smart elements in
the cyber world. Hacker attacks,
phishing, malware and other unauthorized activity are not uncommon
on the net. Identity theft is yet another area of grave concern for those who
rely exclusively on internet banking.
Most banks have made it mandatory to display scanned copies of cleared checks online to prevent
identity theft. It is essential to check bank’s security policies and protections while opening an account and commencing the usage of online banking
facilities.
4. The Trust Factor: Trust is the biggest hurdle to online
banking for most of the customers. Conventional
banking is preferred by the customers because of lack of trust on the online security. They have a perception that
online transaction is risky due to which frauds can take place. While using e-banking facilities lot of questions arises
in the mind of customers such as: Did
transaction go through? Did I push the
transfer button once or twice? Trust is one among the significant
factors which influence the
customer’s willingness to engage in a transaction with web merchants
5.
Customer Awareness: Awareness among consumers about the e-banking
facilities and procedures is still at lower side in
Indian scenario. Banks are not able to disseminate proper information about the use, benefits and
facility of internet banking. Less awareness of new technologies and their benefits is among one of the most ranked
barriers in the development of e-banking[5].
Provisions Of Information And Technology Act, 2000
The Provisions of the Act,
widely deals regarding the Management in offering of E-Banking Services by the Bank Channels along-with
dealing to specific provisions for curbing the E- Banking Frauds and
other ancillary Cyber Crimes.
The Section 3(2) of the Information
and Technology Act, 2000 provides specific provisions for a particular technology as a means of
authenticating the records, like the Servers of Banks and other virtual platforms
by virtue of which the Banks provide us the E-Banking Services.
The Section 4 of the Information
and Technology Act, 2000 further says regarding the security and privacy of a customer’s information
that any matter which shall be in writing or in a type- written form/printed form, then notwithstanding anything contained in such law, such requirement shall be deemed to have been
satisfied as true, if such information is rendered and certified in an electric form and is accessible so as to be usable for the subsequent references.
The Section 72 and Section 79 of
the Information and Technology Act, 2000 further provides the liability for Breach of Privacy of the Customers
on the Service Providing Agency
or the Intermediary which is responsible for providing the Data Service
travelling through their servers on certain terms and conditions.
For improving the quality and status of the E-Banking
services G. Gopalkrishna Working Group
(GCWG) in 2011 has released a Report on the Security of E-Banking in India with
some amendments on 29 April, 2009
which presently constitutes the current regulatory guidelines as an extension of IBG 2001.
Provisions Of Indian Penal Code, 1860[6]
The main provisions relating to dealing
with the E-Banking Frauds in India are as follows:
Section 383: Punishment of Extortion- Whosoever intentionally and illegally puts a person
in fear to deliver any property or valuables to him, otherwise he will
defame that person by posting some
defamatory statement or Article against the said person shall be punished with imprisonment which may extend to three
years, or fine, or both.
Section 379: Punishment of Theft- Whosoever dishonestly take away the goods or any electronic record illegally from the
possession of its rightful owner without his express consent shall be punished with imprisonment which may extend to three years or with fine or both.
Section
406: Punishment of Criminal Breach of Trust- Whosoever mis-appropriates any movable
property like computer device or any
electronic device which was
entrusted to him for a lawful purpose,
causing wrongful damages
to its owner shall be punished with imprisonment which may extend to three years or with fine or both.
Section 417: Punishment of Cheating- Whosoever impersonates some
other person which he is not or
knowingly substitutes such person, and causes wrongful losses to the innocent
victim shall be punished with imprisonment which may extend to one year, or fine or both.
Section 471: Using as genuine a forged document
or electronic record- Whosoever fraudulently or dishonestly uses as genuine any document
or electronic record which he knows
to be forged shall be punished with an imprisonment which may extend
to two years or fine,
or with both.
Section 500: Punishment of Defamation- Whosoever knowingly
publishes without any justification or reasonable cause any statement, image or document
on social platforms, believing and knowing it to be false against any person, firm,
company were such imputation will
definitely lower the image and intellect of him in front of the general public,
shall be punished with simple imprisonment which may extend to two years or fine or with both.
Section
506: Punishment of Criminal Intimidation- Where a person’s threatens other
person to harm his reputation, life
or property via an electronic means which induces that person to commit an illegal act or prevent him doing
an act which is legally obligatory on him shall be punished with imprisonment which may extend to two years, or fine or both.
Legal Issues In Internet
Banking In India:
India is a signatory of
WTO. The basic principles of WTO are
Liberalization, Globalization and
Privatization. Therefore, trade and commerce in India has been liberalized.
Incidentally, the financial sector
has also undergone major changes. With the advent of e-banking, India is facing unprecedented competition from the
World at large. If technology is not updated in financial sector, international trade would be a distant dream.
The deregulation of the banking industry
coupled with the emergence of new technologies has enabled new competitors to
enter the financial services market
quickly and efficiently. Various provisions of law, which are applicable to traditional banking activity, are also applicable to
internet banking. This is does not
overcome the problems, and therefore there is need for introduction
more stringent rules and laws
specifically to meet the problems of e-banking. The legal framework for banking
in India is provided by a set of
enactments, viz. Ø The Banking Regulation Act 1949, Ø
The Reserve Bank of India Act 1934
and Ø The Foreign Exchange Management Act 1999 Ø
The Information Technology Act 2002 Ø
The Consumer Protection Act 1986 Ø The Indian Contract Act, 1872 Ø The Negotiable Instruments Act,1881 Ø The Indian Evidence Act 1872
How
To Take Legal Action In Case Of Smart Card Fraud?
The moment a person come to know
that a suspicious transaction has been done on his or her credit/debit card, has to inform the card issuer immediately. One should lodge a formal complaint
with the bank and ideally call up the customer care number to block the card or
the account immediately. How to file
a complaint? If the fraud is related to net banking, ATM transactions, or any other online transaction happens, the
person have to raise a complaint. But, before
filing a written complaint with the bank or the card issuer, the person has to
make sure that he or she has at least these following
documents
· Bank statement of the last six months of the concerned bank
· A copy of SMSs received
related to the alleged transactions
· A copy of your ID proof and address proof as shown in the bank records
· A
complaint lodged in the nearest police station
explaining the complete incidence along with the above said documents
There are several fake apps
being floating around in the cyber world. In case of any financial fraud committed through an app, in
addition to the above-mentioned documents, also have to furnish the screenshot
of the malicious app and the location from where it was downloaded.
Where To File The Complaint?
Once the card issuer or the bank
has been informed about the fraudulent transaction, one should file a written compliant with the nearest
police station. "An FIR has to be
filed in the local police station only. In case police
refuses to file an FIR, the court can be approached under section 156(3) of the CrPC . But what if
the police asks to go to the Cyber Cell to file the complaint? The concerned person need to approach the cyber cell.
He can file an FIR in the local
police station itself. The cases are forwarded by the police stations to the
Cyber Cell. In case the person wishes
to lodge a complaint directly
with the cyber
cell, even after
having lodged a complaint with the police, can do so. The contact
details of such district cyber cell specific to the person’s
place of residence
can be found on the Internet[7]
Liability In Case Of Fraudulent Transaction:
Now, if the fraud happens and
the bank is not at fault and it was committed by a third-party through an act of scamming,
phishing etc, the RBI rules says that the customer
is not required to pay if
the breach has been reported
within three days of the fraudulent transaction. A transaction reported after that but within seven days, the per
transaction liability of the customer will be limited to the transaction value or an amount set by the Central Bank whichever is lower. And, if you take more
than seven days, "the customer liability shall be determined as per the bank's Board approved policy," says the RBI notification. Having
informed the bank,
as per the RBI rules, the resolution
has to be over within 90 days. Banks have to credit or reverse the unauthorised electronic
transaction to the customer's account within 10 working .
Suggestions
The Banking System is the
life-blood of a Country and its Economy, therefore after analyzing the above issues in Indian E-Banking System,
the suggestions and measures in this
reference are as follows:
1.
The duty which is imposed on the Banks and NBFC’s to maintain
the secrecy and confidentiality
for the sensitive information of the customers must be statutorily recognized
for giving it a legal status and imposing penalty on the Banking Authorities on it’s violation, so that it’s enforcement can be ensured
more stringently than it is there presently.
2.
The
Internal Auditing or the Statutory Auditing like it is their for the Government
Companies by the Auditor appointed
with the instructions of Comptroller and Auditor General of India must be made
compulsory for all the Banks in India, at beginning we will face some teething issues but at last, it will result in
maintaining the transparency in Internal Affairs of the Bank, which will ultimately serve the interests
of the consumers and will result in
their benefit at large.
3. Some concrete measures like Biometric
Authentication at the ATM Machines,
or before logging in the E-Banking
Website Portal which has started being opted by certain Banks in the Country must be made mandatory
for all Banks by the Reserve Bank of India.
4.
Each
Banks should incorporate one In-House Cyber Grievance Redressal Cell, who could directly
deal with the Banking Frauds happening in their Banks, they must analyse their functions and affairs annually
and send their Annual Report to the concerned State Cyber Cell or the District Cyber Cell for their Expert Advice and Guidance in this reference.
Conclusion
In the days to come, banks are
expected to play a very useful role in the economic development and the
emerging market will provide business opportunities to harness. As banking in
India will become more and more knowledge supported, capital will emerge
as the finest assets of the banking
system. Ultimately banking is people and not just figures. Customers of Indian banks are still reluctant in adopting
electronic banking. Understanding the reasons for this resistance would be useful for bank managers in formulating
strategies aimed at increasing online
banking use. Crime based on electronic offences are bound to increase and the
law makers have to go the extra mile compared
to the fraudsters, to keep them at bay. Technology is always a double-edged sword and can be used for both the purposes,
good or bad. Preamble of the IT Act 2000 provides that the Act
was passed with the objective to give legal recognition for transactions carried out by means of electronic data
interchange and other means of e- commerce.
Further the Act has also made amendments to the IPC 1860, Indian Evidence Act 1872, The Bankers Books of Evidence Act
1891, and the Reserve Bank of India Act 1934 for facilitating legal recognition and regulation of the commercial
activities. Though this objective of
the Act is not to suppress the commercial activity, but has defined certain
offences and penalties to smother such omissions, which is understood to come within
the characterization of cybercrimes. For customers security is
still a big concern for usage of e-banking services which the present legislation
is inadequate to deal with.
The challenges ahead to the court of law to apply the provisions have been difficult due to lack of
clarity. The legal issues of Internet banking
in India must be taken more seriously by all stakeholders especially the Indian
banks. However, better
results cannot be achieved till cyber security
requirements made mandatory
on the part of Indian banks. Cashless
India is the future India!
References –
·
https://shodhganga.inflibnet.ac.in/bitstream/10603/148886/12/12_chapter%205.pdf
·
Mr. Pema Lama, Recent Trends and Development of E-Banking: Indian Perspective,
Recent
Trends and Development of E-Banking: Indian Perspective - Banking Finance
- News,
Articles, Statistics, Banking Exams, Banking Magazine, (visited
on 2023)
·
http://jsslawcollege.in/wp-content/uploads/2013/05/LAW-RELATING-TO-E- BANKING-IN-INDIA-%E2%80%93-AN-OUTREACH-CHALLENGE.pdf
·
Banking Frauds: How to report a net banking,
debit or credit card fraud (indiatimes.com)
·
Yashraj Baise, Major Legal Issues in Indian E-Banking
System, Available on, Major Legal issues in Indian E-Banking
System - iPleaders, visited on 2023
[1] S. Praveen Kumar ,J. Pavithra , Recent Trends In Indian Banking
Sector ,98[1].pdf,(visited on 2023)
[2] Mr. Pema Lama, Recent Trends and
Development of E-Banking: Indian Perspective, Recent Trends and Development of E-Banking: Indian
Perspective - Banking
Finance - News, Articles, Statistics, Banking Exams, Banking
Magazine, (visited
on 2023)
[3] Divya.K, Legal Aspects of Internet Banking in India, Legal-Aspects-of-Internet-Banking-in-India[1].pdf, (Visited on 22 April ,2023)
[4] Divya.K, Legal Aspects of Internet Banking in India, Legal-Aspects-of-Internet-Banking-in-India[1].pdf, (Visited on 22 April ,2023)
[6] Yashraj Baise, Major Legal Issues in Indian E-Banking System, Available on, Major Legal issues
in Indian E- Banking System - iPleaders, visited on 2023
Article Information
E-BANKING AND RECENT TRENDS IN INDIA BY: VIDYA BABAN SAID
Authors: VIDYA BABAN SAID
- Journal IJLRA
- ISSN 2582-6433
- Published 2023/06/17
- Issue 7
About Journal
International Journal for Legal Research and Analysis
- Abbreviation IJLRA
- ISSN 2582-6433
- Access Open Access
- License CC 4.0
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