1. 1. Name- Ria Tandon BA. LL.B , (Hons.) 4 th Year 500017689 E-BANKING ISSUES & CHALLENGES
2. 2. E-Banking - The Concept E- Banking Telephone Banking Electronic Banking Other Electronic Delivery Channel Example- ATM (Intranet Concept)
3. 3. Information on E-Banking What is Internet Banking or E- Banking ?The performance of banking activities via the Internet. Online banking is also known as "Internet banking" or "Web banking." A good online bank will offer customers just about every service traditionally available through a local branch, including accepting deposits (which is done online or through the mail), paying interest on savings and providing an online bill payment system. Easy Transaction - Electronic fund transfer is about transferring of funds through electronic medium. It consists of transfer of funds from one account to the other, instead of other conventional medium for e.g. cheques/cash. It is a user friendly and customer oriented, as there is a need of only the user to be connected to through his/her browser to the banks centralized database wherein it is web enabled
4. 4. IT and E-Banking Sound Payment System -The payment basis with respect to the banks in India has its large base via the cash medium even though there is a provision of that of the non-cash basis. Many banks have taken the initiative of setting up an IT structure to promote electronic mode of payment. Sound Payment System Herein the role of IT in E-banking has been exlained. Information Technology Improvement of Financial Infrastructure System - Several steps have been taken by reserve bank of India to speed up the up gradation of banking system through improving the infrastructure of financial system.Some of these steps include the payment through the MICR cheque as well as the Electronic Funds Transfer and Electronic Service Clearing Financial Infrastructure System
5. 5. Means of E-Banking RTGS E- Cheque Tele Banking Mobile Banking Smart Card ATM
6. 6. E- Banking in India
7. 7. Indian Scenario E banking contributes heavily to countries development of economy both as part of past and future. Competition has lead to the adoption of E- banking. The guidelines which are set up by RBI with respect to the security issues is not followed by most of the banks in India. RBI has also insisted for the banks to adopt ethical hacking policies as the banks do not have any clear guidelines to follow regarding this aspect under the IT act or any by the RBI.
8. 8. Continued.. The ICICI Bank kicked off online banking in 1996, followed by a host of other banks. But even for the Internet as a whole, 1996 to 1998 marked the adoption phase, while usage increased only in 1999, owing to increased PC penetration and a tech-friendly atmosphere. The IT Act of 2000 did address the need for banks to go online However, one cannot say the aspirations of the industry have been satisfactorily looked into. Reserve Bank of India has taken several initiatives in setting guidelines for Internet banking, and reviews them at periodic intervals. and have laid out security measures to
9. 9. Effect of E-Banking in India Secured Future The future of e-banking seems secure due the ever increasing adoption and arrival of new technologies to address existing limitations. Major innovations are expected in the area of e-banking using mobile phones, in security provision and customer services. Solutions being Adopted Develop a clear strategy and communicate it throughout the organization. It must be driven by the top management and should take into account the effects of e-banking. Solutions being Adopted The electronic devices which perform interact with customers and communicate with other banking system is called electronic banking delivery channels which is being adopted. E-Banking transaction needs some interface to communicate with banking customer. All the electronic transaction performs through some interfaces.
10. 10. Issue 1: Customers Types of Bank Observed frequency Percentage PSU 425 42.5 Private Bank 445 44.5 Foreign Bank 38 3.8 Co operative Bank 92 9.2 Total 1000 1000
11. 11. Awareness of E-Banking (1 st Issue) Particulars Category Respondents Percentage Awareness of E-banking offers NO 106 10.6 Awareness of E-banking offers YES 894 Total: 1000 89.4 Total:100
12. 12. Problems faced with E-Banking ( 1 st Issue) Reason for not using E Banking Services Respondents Satisfied with traditional Banking 51 It is difficult to use 32 Fear of insecure transaction 26 No access to Internet/Mobile/Other 28 Lack of Operational Knowledge 22 Hidden Costs 25
13. 13. Issue 2 : Government Failure of Implementation of Project No Proper Guidelines from RBI Sluggish Services Trust Issues Speedy Decisions Needed
14. 14. Issue 3: Small Scale Enterprises Smaller-Loans needed therefore large charge so as to cover the cost. . The online information is considered to will enhance the SMEs ability wherein they can secure financing. Collaterals and Guarantees -in many developing countries, banks are still in the very early stage of mastering sound lending policies and good credit practices.
15. 15. Issue 4: Online Frauds and Internet Security Trail Procedure Error Data Protection Hacking
16. 16. India VS. US Scenario USA The US laws if there is any bank fraud which takes place because of the e-banking then the liability lies on that of the bank wherein the bank has to pay the liability and there is a cap of $ 50. USA Is more proactive when it comes to resolving the issue of Internet fraud. INDIA While the story is different when it comes to India , here the customer is liable for any fraud if it takes place via the internet. Reserve Bank of India has come up with draft payment vision document for the year 2012-15 wherein it states that there will be the introduction of that of the customer protection measures as like that of the zero liability clause which is considered to be similar to that of the paper based transaction and the proving of the aspect of the good faith lies onto the banks, wherein under the electronic aspect this basically lies onto the customers largely
17. 17. Issue 5: Cross Border E- Banking Foreign Laws & Regulations Licensing Policies & Laws may lead to due diligence of the bank Treaty Shopping
18. 18. Issue 6: Bitcoins It is an online system by which payment can be done. This system involve peer to peer users for the transaction wherein there is no need for an intermediately. This system is regarded to be that of a decentralized virtual currency by the US treasurery. It is considered to a largest of its kind with respect to the total market value which is there. The use of Bitcoin as a form of that of the payment for the service is growing rapidly. Even though many merchant are accepting its use but it does not have much market as for the retail transaction. Some authorities like the European Banking Authority have warned the users that they cannot be protected when it comes to refund rights or that of the charge backs
19. 19. Continued . Many of the giants are using the bitcoin like Microsoft in the year 2004 and then the Chinese Internet giant Baidu. Bitcoin is seen with an eye of suspicion in India. According to the SourceForge, this online platform is connecting the consumers to that by the open source project and the downloads in India had reached to 35, 648 in India Anuj Srivas, Reserve Bank Warns against Bitcoin Use.
20. 20. Legal Provisions E -Banking
21. 21. Legal Provision Section 131 of that of the Negotiable Instrument Act, 1881 are of the view that there is a need with respect to the establishment of that of the identity as well as to make inquiry with respect to the reputation of that of the future customer. That is why there was an introduction of that under the IT Act 2000 with respect to the digital certification machinery Refer to Section 131 of Negotiable Instrument Act, 1881. Section 21 of the IT Act banks to be allowed to issue digital signature as well to be the authority which would certify the internet banking. RBI also has the power to make recommendation with respect to the Central Government for the notification of that of the business of the certifying authority as being an approved authority under the clause (o) of that of Section 6(1) of that of the Banking Regulation Act.Refer to Section 21 of Information Technology Act 2000. may assess the risk and insure themselves against such risk The Consumer Protection Act, 1986 clearly defines the rights of consumers in India and is pertinent to banking services as well. Presently, the rights and liabilities of customers availing Internet banking services are being determined by bilateral agreements between the banks and customers. It is subject to debate vwhether any bilateral agreement defining customers rights and liabilities, which are adverse to consumers than what they enjoy in the traditional banking scenario will be legally secured. Considering the banking practice and rights enjoyed by customers in traditional banking, it appears the banks providing I-banking may not absolve themselves from liability to the customers on account of unauthorized transfer through hacking. Similar position may obtain in case of denial of service. Even though, The Information Technology Act, 2000 has provided for penalty for denial of access to a computer system (Section-43) and hacking (Section 66), the liability of banks in such situations is not clear. The Group was of the view that the banks providing Internet banking s.
22. 22. Case Analysis :If it would have been an Indian Case PATCO VS. PEOPLES UNITED BANK Patco, a family-owned construction firm in southern Maine, fell prey to the Zeu Sbotnet in May 2009. According to the court ruling, indicators of the ZeuStrojan were found on the employee's computer, but it was later quarantined and deleted by an outside IT consultant who ran an anti-malware scan. Hackers bilked its account with Ocean Bank for more than $588,000 before the fraudulent activity was detected and stopped. The bank recovered roughly $243,000. Patco sued Ocean Bank for the balance, but it won't see a dime. A U.S. District Court magistrate in Maine recently recommended the case be dismissed, citing the bank's accordance with Federal Financial Institutions Examinations Council (FFIEC) security guidelines. Here the SMBS were responsible to submit the money for the loss. 'reasonable security' was very tightly aligned with FFIEC guidance,"
23. 23. Continued. Similar Ideas but different judgement: Experi- Metal, a Michigan-based manufacturing firm, sued Comerica after it was robbed of more than $1.9 million by hackers in early 2009. At the surface, the case bears quite a bit in common with the Patco suit, yet it produced an entirely different outcome. US District Court Judge Patrick J. Duggan ruled earlier this month in favor of Experi-Metal, requiring the bank to reimburse the company's losses.
24. 24. Conclusion.. Banking Regulations Act, 1949, the Reserve Bank of India Act, 1934 and the Foreign Exchange Management Act, 1999 The Information Technology Act 2000 attempted to address a number of e-commerce regulatory issues. Reserve Bank of India has taken several initiatives in setting guidelines for Internet banking, and reviews them at periodic intervals. Most important, RBI approval was made mandatory for all banks before offering any transactional services over the Internet. Adoption of this type of System: While in the US n 1973, the U.S. Defense Advanced Research Projects Agency (DARPA) initiated a research program to investigate techniques and technologies for interlinking packet networks of various kinds.