LEGAL CHALLENGES TO INTERNET BANKING

INTRODUCTION : 

The internet revolution may be a worldwide phenomenon and moving forward by progressive data. India is looking towards a rise during internet penetration shortly within the area of electronic commerce. The beginning of the web era and therefore the development of data technology and telecommunications are undisputed are inflicting a major impact on the financial market and institution. The delivery channel includes directs dial-ups connections, public networks, and personal networks and therefore the device includes telephones, personal computers, etc. The term “Electronic Banking” or E-banking is defined as remote banking services provided by authorized banks or either representative through a device operated. Banking is the growth engine of an economy. During the past few decades, there has been a technology outburst altogether sectors and banking has been one among the sectors to adopt information technology. Internet or e-banking implies any client with a PC and a browser can get related to his bank’s site to play out any of the virtual banking functions.

The working party because its term of reference was to look at the various perspective of Internet banking and recommended appropriated standard to adoption in India, particularly with references to the subsequent :

1) Risk to the organization and banking industry, related to internet banking and method of adopting managing risk.

2) Identifying the gaps in the supervisory and legal framework with references to the prevailing banking and financial regulation, IT regulations, tax laws, consumer protection, criminal laws and concealment, and other cross border issues.

3) Identifying international best practices on operational and control issues.

4) Recommending minimum technology and security standard.

CURRENT LEGAL ISSUES IN INDIA : 

  • The Banking Regulation Act 1949
  • The Federal Reserve Bank of India Act,1934
  • The exchange Management Act, 1999

Internet banking is an extension of normal banking, which uses the internet both as a medium of receiving instruction from the customer and also delivering banking services. In this digital age, the issue which has arisen is regarding the legality under the existing laws, of certain sorts of electronic, banking transactions on the web. Banking over the internet has attracted increasing attention from a banker and other financial services industry participants, business press, regulator, and therefore the lawmakers. The government of India has sanctioned the knowledge Technology Act 2000 to offer legal identification for financial transactions by the banks administered by the way of electronic data, which has also drawn upon the Model law came into force with effect from Oct 17, 2000. This act also amends a certain provision of the Indian Penal code, the Indian Evidence Act 1872, Federal Reserve Bank of India Act 1934 to facilitate e-commerce in India.

However, this act doesn’t apply to

  • Negotiable instrument has defined in section 3 of the legal document Act 1881,
  • Power of attorney defined in section 1A of Power of Attorney Act 1882,
  • Will as defined within the clause (h )of section 2 within the Indian succession Act 1925, Ø
  • Contract of the sale or conveyance of immovable property or any interest in such property,
  • Such class of documentation or transaction as could also be notified in Central Government in the official gazette,

 

CASE LAWS : 

  • The ICICI Bank has begun web banking in 1996 describing it as rubbish and useless, which was even done by the host of other banks. But the usage of the E-Banking in India, raised gradually only from 1999, due to lower ISP Charges, and increased penetration of PCs with a tech-friendly atmosphere.]

 

  • Union bank of India and Anr. V. State of West Bengal

The difficulty raised before the Calcutta supreme court was whether a secured creditor is entitled to invoke the provisions of section 14 of the SARFAESI subsequently to the sale of immovable property under the SARFAESI ACT, 2002, on the idea of symbolic possession? The court, while answering the difficulty, held that the bank as a secured creditor cannot maintain an application under section 14 of the secularization and Reconstruction of monetary Assets and Enforcement of interest Act, 2002 to get actual physical possession of the property after issuance of a purchase certificate.

  • Asian resurfacing of road agency Pvt. Ltd. V. Central bureau of investigation, 

It was held before the high court or other courts pending matters, where a stay of proceedings during a pending trial is working, stay will automatically lapse after 6 months from the date of this judgment unless extended by speaking order. The court further held that for future proceedings where a stay is granted, unless an extension is granted by way of a speaking order, the stay will endways the expiry of six months from the date of the order. The speaking order, extending the stay must show that the case was of outstanding that continuing the stay was more important than having the trial finalized.

INDIAN POSITION : 

The Indian banks’ record in Internet banking is nothing much to write down about. The ICICI Bank began online banking in 1996, followed by some other banks. On the opposite hand, the general public Sector Banks (PSUs) lagged within the race for adopting Internet banking practices. While, among the PSUs, the depository financial institution of India took the lead, others are yet to catch abreast of Internet banking services. Some banks blame it on the shortage of regulations and procedures to travel online. But, not many are willing to shop for any transactional services over the web. This was however shelved, giving banks more autonomy on the webspace, though ensuring at an equivalent time, that it might be strictly under the provisions of the RBI. Earlier, the RBI had adopted the recommendations of the ‘Working Group on Internet Banking,’ which examined three thrust areas like Technology and security issues, legal issues, and regulatory and supervisory issue.

SUGGESTIONS AND MEASURES : 

  • The duty which is imposed on the Banks and NBFC’s to take care of the secrecy and confidentiality for the sensitive information of the purchasers must be statutorily recognized for giving it status and imposing a penalty on the Banking Authorities on its violation so that its enforcement is often ensured more stringently than it’s there presently. ·

 

  • The Internal Auditing or the Statutory Auditing love it is there for the govt 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 the beginning, we’ll face some teething issues but eventually, it’ll end in maintaining the transparency in Internal Affairs of the Bank, which can ultimately serve the interests of the consumers and can end in their benefit at large. ·

 

  • Some concrete measures like biometric identification at the ATM Machines, or before logging within the E-Banking Website Portal which has started being opted by certain Banks within the Country must be made mandatory for all Banks by the Federal Reserve Bank of India. ·

 

  • Each Bank should incorporate one In-House Cyber Grievance Redressal Cell, who could directly affect the Banking Frauds happening in their Banks, they need to analyze their functions and affairs annually and send their Annual report back to the concerned State Cyber Cell or the District Cyber Cell for his or her Expert Advice and Guidance during this reference.

CONCLUSION :

As with everyone connected with the internet, banking, and electronic commerce on the internet is changing rapidly. To properly advise their clients, a lawyer must be able to understand the technology involved and must also be prepared to review and if possible adapt traditional legal principles in their applications to the new technology.

According to the survey of International privacy laws and practice, there is no general privacy law in India.RBI ombudsmen offices have been flooded with such complaints. In these circumstances, online banking in Indian is risky.E-banking in India cannot succeed until a strong legal framework in this is enacted. We have no specific e-banking laws in India.RBI is issued many guidelines in this regard and even our Information Technology Act 2000 contains some indirect and implied provision for the internet or E-banking. It is high time the banks operating in India to keep their e-banking infrastructure technologically and legally sound. Online banking in India or e-banking in India is increasingly being used by both banks and customers alike. This brings mobility and convenience to both banks and customers. With the benefits, there are negative aspects of e-banking as wells.

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