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Does E-banking lead to a compromise in Consumer Rights?

E-Banking refers to the practise of conducting financial transactions over the internet, such as seeing and verifying account activity, examining account balances, printing statements, and keeping tabs on non-credit and unpaid checks. Clients can take advantage of a wide range of services, all available through their online banking platform. They offer a wide range of financial services, including checking, savings, and more.

On the other hand, traditional finance generates income through the use of a distributed computing network to hold capital in dynamically updated local databases. Contrarily, the Internet generates revenue by tapping into the company's central, automatically updated database. Ideally, we'd like the banking system to provide more options that bring customers into closer contact with the bank's dayto-day operations while also facilitating the consolidation of back-office processes among financial institutions.

The "clan" of banks benefits greatly from the provision of such facilities as an alternative to banking. With the increasing internationalisation of the Indian economy came the imperative to provide our customers with internet banking services at par with the best in the world. Banks are successful because customers typically conduct business while relaxing at home. Individuals have access to banking services, including the ability to conduct transactions at any time of day, that they may not have had before.

Using the Internet, we are able to do things like move money between accounts, pay bills online by submitting checks, view and print out account statements, and even request a cheque book from the comfort of our own homes. Because of recent progress and the expectation of financial and economic success, electronic banking is widely regarded and encouraged worldwide. Additionally, bankers insist that their industry is even more crucial than the Industrial Revolution.

Electronic cigarettes (e-cigarettes) are becoming increasingly common as a result of the many positive effects they have on users. Many well-known websites have grown thanks to the rise of online shopping, including eBay, Yahoo, Dell, and Amazon. One well-known financial institution has also joined the social networking bandwagon.

The Legal Structure around e-banking in India

In India, online banking has become widely accepted and utilized, with the 1990s witnessing the emergence of banking services that eliminated the need for physical branches. ICICI Bank was the first Indian financial institution to offer online banking, followed by HDFC and Citibank. In 1999, banks started providing online banking services. To safeguard electronic transactions and e-commerce, the IT Act of 2000 was passed, providing legal protection from October 17, 2000.

The Reserve Bank of India (RBI) constantly monitors and reviews legislative and other requirements related to e-banking to ensure its rational growth and avoid threats to financial stability. By January 2016, India had 196,079 automated teller machines and 1,337,310 point-of-sale terminals. Commercial banks in India have embraced e-banking and other measures to cope with increasing competition, particularly from newly established private and foreign banks.

Indian banks offer a diverse range of electronic banking services, including ATMs, Internet Banking, Mobile Banking, Phone Banking, Tele Banking, Electronic Clearing Services, Electronic Clearing Cards, Smart Cards, Door Step Banking, and Electronic Money Transfer. According to RBI's Annual Report 2020-21, the number of transactions processed by payment systems increased by 26.2%, following a 44.2% increase the previous year.

The POS terminal market is divided between private and public banks, with a 67%-33% split. Payments banks hold a 5% market share, while international banks account for 1%. As of March 2021, there were 960.25 million cards in use, including 898.20 million debit cards and 62.05 million credit cards, with year-over-year increases of 8% and 7%, respectively. The total number of prepaid payment instruments reached 2.20 billion, with prepaid cards at 189.93 million and mobile wallets nearly 2.01 billion.

During the first quarter of 2021, mobile wallets facilitated 1.13 billion transactions worth INR 411.75 billion, while Net Banking/Internet browsers processed over 937.60 million transactions. Mobile transactions accounted for INR 31.98 trillion, while online purchases totaled INR 131.34 trillion. Within UPI transactions, Person to Person (P2P) accounted for 55% of volume, while Person to Merchant (P2M) transactions accounted for 45%. The total UPI transactions exceeded 2.73 billion, valued at over 5 trillion Indian Rupees.

The Bharat Bill Payment Central Unit (BBPCU) processed 90.71 million payments in the first quarter of 2021, with a total value of INR 134.70 billion, representing a significant increase compared to Q1 2020. AePS (Aadhaar-enabled Payment System) facilitated over 449.45 million transactions in Q1 2021, showing an almost 120% increase compared to Q1 2020, with transactions totaling INR 633.38 billion, a 93% rise from Q1 2010.

RBI Provisions on minimum standards for e-Banking

The Ministry of Information Technology used the powers granted to it by the Information Technology Act, 2000 on October 17, 2000, when it issued a notification. The following are the minimum standards of security set by the RBI, which were established pursuant to this notice by the Reserve Bank of India (hereinafter referred to as "RBI") in a notification dated 14.06.2001 and by an amendment to that notification dated 20.07.2005, where the need for the approval of RBI was scrapped off:

Digital signatures based on a Security Sockets Layer encryption standard with a bit length of 128 are used for rigorous authentication. Among other things, the Board of Directors must approve the bank's security policy, which the Security Officer will implement in order to ensure compliance with the standards established by the IT Act.

At the time, concepts like login id, password, and biometric verification were novel; consequently, banks were tasked with adopting these novel ideas by implementing measures to ensure the security and privacy of their customers' online and digital banking transactions, such as by using a proxy server to prevent unauthorised access. It was determined that it was essential to upgrade, fix bugs, and install other security software before any Internet Banking service could be made available to the public.

E-banking security holes must be disclosed and patched as soon as feasible, and future policy decisions should be made with security holes in mind. Meanwhile, it's the bank's responsibility to maintain track of every e-transaction and message sent and received, in both encoded and decoded form.

Information Technology Act

Although the Banking Regulation Act of 1949 and the Reserve Bank of India Act of 1934 lay the legal groundwork for electronic banking, the IT Act governs all forms of cybercrime and electronic payment related systems.

All contracts and electronic transactions are valid and enforceable under the IT Act, as the purpose of the legislation was to facilitate e-commerce and governance. As such, the bank is required to keep and analyse all electronic papers and digital signatures in accordance with the IT Act.

As the theft of data through unethical means, such as hacking, the development, and the propagation of viruses, is illegal under the requirements of the IT Act, no e-banking transaction may survive if it is not in line with the provisions of the IT Act. The Act also protects ISPs and intermediaries from legal action regarding illicit content on their networks.

This Act protects the security and privacy of electronic transactions, including sign-in, password typing, and other confidential information, and makes any violation thereof punishable. In exchange for this protection, the Bank (intermediary) is obligated to keep records and preserve them as directed by the Central Government from time to time.

Indian Penal Code

  1. Section 66-B of the IT Act prohibits the illegal receipt of stolen data or information from any technological computer-based device, which overlaps with the provisions of Section 411 of the Indian Penal Code (IPC). Consequently, both laws make it unlawful and punishable to engage in activities related to stolen data, including hacking, creating infection vectors, or spreading viruses. However, it is worth noting that while Section 378 and Section 424 of the IPC also address data theft and its facilitation, the IT Act does not have an equivalent penalty for the creation or use of forged electronic documents under Section 468 of the IPC.
  2. Section 66-C of the IT Act deals with the offense of "cheating by impersonation," which bears resemblance to the concept of "dishonestly receiving stolen property" in Section 411 of the Indian Penal Code (IPC). However, it is important to mention that Section 425 of the IPC, which penalizes "mischief," has not been incorporated into the IT Act. Consequently, actions such as spreading viruses or denying access to personal data of individuals may not carry penalties under the IT Act, potentially resulting in shorter imprisonment terms of up to 3 months as provided by other relevant laws.

Existing Legal Remedies

Because the existing legal structure has failed to address various issues in e-banking, the following are some of the remedies and solutions to the existing cyber problems encountered during e-banking:

Jurisdiction and enforceability:

Because the internet is a borderless world and cybercrimes threaten the sanctity of e-banking, cyber-attacks can occur from any computer located in India or abroad; therefore, Section 75 of the IT Act grants universal jurisdiction whenever any type of cyberattack occurs on any computer located within the territory of India. Cyber cells located in various districts across India investigate and prosecute such crimes. If a cyberattack is sponsored by a foreign state, the Republic of India may seek compensation through attachment of that foreign state's property in India. Cyber Cells are seeking compensation, penalties, and prosecution.

Under the provisions of the IT Act, specifically Sections 43A and 72, various offenses such as theft, breach of confidential data, cheating, and similar actions are deemed punishable. In cases of fraud during E-Banking transactions, the victim is entitled to compensation. Additionally, the Banker's Book Evidence Act ensures that digital bank records are admissible as documentary evidence in court, as stated in Sections 65A and 65B of the Indian Evidence Act, 1872.

For matters pertaining to consumer accounts' privacy, rights, deficiencies in E-Banking services, liabilities of banks towards their customers, and consumer rights, the Consumer Forum with relevant pecuniary jurisdiction under the Consumer Protection Act, 2019, can be approached for resolution.

Regarding cases of money laundering through E-Banking, the Prevention of Money Laundering Act, 2002, specifically Section 11 empowers authorities to prosecute and prevent such activities. Banks are also obligated under Section 11 to maintain records of all transactions conducted through their electronic payment gateway.

Indian Bank should make an effort to keep its online banking system well-maintained so that its customers, including consumers, can take advantage of the many advantages that using the internet offers.

The Following Are Some Recommendations That Aim To Get More People To Use Online Banking:

  1. Indian Bank should take the required steps to raise student awareness of the bank's E-banking services to increase the current moderate level of awareness.
  2. Banks can implement more methods of promotion to raise consumers' awareness of E-banking services.
  3. If the bank takes into account the requirements of its student customers, it can improve its services to meet their expectations.
  4. Many consumers, despite the convenience of online banking, nevertheless prefer to use traditional channels like ATMs and bank tellers.
  5. The bank is now accountable for clarifying these distinct e-banking channels through ads and advertisements.
  6. The bank's duty is to inform the client of the advantages of using online banking and how to access them. Consumers would be prompted to abandon the more conventional methods of learning.
  7. Consumers who are aware of E-banking services yet don't use them, a trend researchers attribute to misunderstandings and a lack of knowledge. The bank should reach out to these consumers in an effort to convert them to their service.
  8. If the bank decides to do anything to increase the number of people who use online and computer banking, they might upgrade the current infrastructure. The most effective customer service is the best strategy to encourage customers to switch to E-banking.

As new technologies permeate all aspects of production and commerce, our economy is constantly shifting. There are a plethora of other developments taking place that are reshaping the economy in fundamental ways. Banks have been eager to take advantage of the favourable conditions in many nations by introducing new forms of banking that are both rapid and convenient. Banks utilised new methods and technologies to display and deliver services in a way that was more convenient for their consumers who used e-payments. Customers' expectations for banking services and the industry as a whole were both altered as a result of this.

The Indian banking industry, which plays a pivotal role in improving services for customers, has reached a tipping point towards full digitalization. Consumers can complete a wide variety of transactions, both monetary and otherwise, using online banking, making it one of the most important banking channels. Internet banking, short message service banking, automated teller machine banking, mobile banking, electronic checks, the unstructured personal interbanking payments system (UPI), and debit and credit cards are just some of the options available.

E-banking has become increasingly important in today's interconnected world because of the difficulties it has overcome and the opportunities it has presented to the banking industry. Building customer loyalty is a key objective for India's banking industry. Training and development, as well as streamlining and standardising the banking process, can help achieve this goal.

The younger generation is slowly coming around to the idea that online banking is the way to go. As time goes on, e-banking in India will grow in popularity and become the norm.

The POS terminal market is dominated by private banks, rather than government institutions. Throughout the country, prepaid payment instruments are increasingly being purchased with mobile wallets. There is an ongoing effort by the Government of India and other government agencies to improve the security, privacy, and dependability of e-banking through the use of modern digital channels.

Customers rely on their computers, smartphones, and other electronic banking tools more and more, while they visit physical bank locations less frequently. The popularity of banking via mobile device and the internet is rising quickly. Ebanking has become increasingly popular in India, and its users are increasingly in tune with the country's current state of affairs.

  1. Ansari, Seharish J & Khan, Nisar A (2017). E-Banking in India: Progress and Challenges. International Journal of Innovative Research and Advanced Studies, Volume 4, Issue 8, pp 334-340.
  2. Bedi, M. (2010). An integrated framework for service quality, customer satisfaction and behavioral responses in Indian banking industry�A comparison of public and private sector banks. Journal of Services Research, 10, 157-172.
  3. CHAVAN, J. (June 2013). Internet Banking- Benefits And Challenges In An Emerging Economy. International Journal of Research in Business,� Impact Journals.
  4. Dangwal..R.C., K. S. (January 2010). The upcoming Technology and the associated innovations. sfo, ca: The ICFAI University Press.
  5. Seranmadevi R MG., Saravanaraj (2012). An Empirical Study on Quality of Internet Banking Services in India. European Journal of Economics, Finance and Administrative Sciences, (52).
  6. Servon, L. a. (2008). Consumer financial literacy and the impact of online banking on the financial behavior of lower-income bank customers', Journal of Consumer Affairs (Vol. 42).
  7. Srivastava, R. K. (2007). Customer‟s perception on usage of internet banking. Innovative Marketing, 3(4), 67-73.
  8. United Nations Conference on Trade and Development (UNCTAD) (2002): Ecommerceand Development Report, (

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