E-banking is the delivery of banking services via electronic means, with
customers having unlimited access to data regardless of time or location. With a
vast number of prospective consumers, India's e-banking services have progressed
significantly. Online banking solutions centered on the Internet have exploded
in popularity in subsequent years. For finance providers, the introduction of
new kinds of technology has generated extremely competitive market
In the 1990s, there was a stronger emphasis on technological advancement in
India's banking industry. Banks have been using technology to deliver improved
service quality at higher speeds. Digital banking is quickly becoming one of the
most popular technologies, with a huge impact on people's everyday lives.
Customers may perform their banking from a variety of locations thanks to Online
Banking and Mobile Wallet. Banks have also increased their attention on the
rural sector and provided a set of resources tailored to their client's unique
In India, the Internet is steadily gathering steam. The banking sector
is evolving, and it is having a significant impact on banking connections. The
distribution of banking goods & services through the Internet is defined as
Online Banking. Several banks across the globe now have an online structure as a
result of ATMs, Online Banking, and other services and support.
In the banking
industry, information technology developments have a significant influence on
the creation of more favorable financing procedures and easier-to-use financial
services. Digital banking is novel, and banking firms' advancement and use of
these innovations are believed to appear in an even more streamlined banking
However, changing market conditions necessitate banks gaining a deeper knowledge
of their customers' demands. As a result, this paper describes the idea of
E-banking, as well as its benefits and drawbacks.
"India has seen a dream of Digital India. From the latest science to the latest
technology, everything should be available at the tip of one's finger.
" - - Narendra Modi
The competitive constraints and growing customer demand forced banks to create
new technology and instruments. This discovery gave birth to Internet banking,
which has transformed the financial sector throughout the world. Speaking of
which, the application of the Online platform for financial services, including
conventional services, such as account creation or movement of assets among
various accounts, along with the use of innovative banking services like E: Bill submission & payment, enables clients to pay for something and obtain the
bills on the webpage of a bank.
E�Banking Web sites usually include Internet
banking services. The Indian client is gradually but steadily migrating to
Internet banking in India. A majority of banks have already implemented Internet
banking or are in the process of doing so. Indian banks began offering E-banking
services with basic features such as receiving interest rate data, checking
account balances, and calculating creditworthiness.
The services were then
expanded to include online bill payment, financial transfers among accounts, and
corporate cash administration. To keep up with the ever-increasing rivalry,
banks are turning to Online banking technologies. It has also evolved as a
critical asset for enhancing productivity, controlling operations, and lowering
costs by eliminating paper-based and labor-intensive procedures with automatic
systems, resulting in increased efficiency & profit growth.
The digital banking network differs from conventional banking, in which a bank
functions physically to serve the requirements of clients and incurs significant
operational costs. The primary goal of implementing the e-banking platform is to
offer users with convenient access.
Types Of E-Banking
Banks provide several kinds of services via e-banking systems. Three types are
- Level 1: This is the basic service level offered by banks via their websites.
The bank provides consumers with information about its goods and services
through this service. In addition, certain banks can also get e-mail answers to
- Level 2: Banks allow their clients to provide instructions or requests for
different services, check their balance of accounts, and so on at this level.
However, banks do not allow their clients to transact on their accounts
depending on funds.
- Level 3: Banks enable their clients to run their money transferring accounts,
bill payments, securities acquisition, resettlement, etc. at the third level.
As a supplement to the provision of services, most traditional banks provide
e-banking services. In addition, several modern banks mainly provide financial
services via the Internet or other electronic transmission methods. Furthermore,
some banks have no physical branch in the nation as an 'online only' bank.
Purpose Of E-Banking
- The cheapest way is to reduce transaction costs: electronic transactions
- A little tolerance for human mistake - because the information is transmitted electronically, human error does not exist
- Less paperwork - digital records minimize documentation and make handling easier. It is also eco-friendly.
- Reduced fixed costs - a decreased requirement for branches that means cheaper fixed costs.
- Faithful consumers: since e-banking is customer-friendly, banks have increased customer loyalty.
- Comfort - a client may access and transact 24x7x365 from all around the world.
- Lower cost per transaction - since for each transaction, the client does not have to visit the industry saves him time and money.
- No boundaries in geography: Geographical distances might hinder some banking transactions in conventional banking systems. Geographic boundaries are nevertheless decreased with e-banking.
- Account Reviews: Corporate owners and selected personnel can easily access their accounts using the online banking interface. This enables you to check the account activities and guarantee that the account works well.
- Better productivity: Improved productivity through electronic banking. It enables regular monthly payments to be automated and a number of additional features increase the efficiency of the company.
- Lower expenses: Costs often depend on the resources used in banking connections. If a company demands more wire transfers, deposits, etc., it charges greater costs to a particular firm. These expenditures are reduced with Internet banking.
- Fewer bugs: Electronic banking helps to decrease normal banking bugs. Bad handwriting, wrong data, etc. can lead to costly blunders. Easy account review also improves the accuracy of financial transactions.
- Reduced fraud: The e-banks give all workers the ability to change their financial activities with a digital footprint. The company therefore has a greater visibility in its transactions, which prevents any scammers from playing malaise.
History Of E-Banking Services
With the advancement of the internet, the notion of e-banking has developed. A
credit card supports the notion of e-banking as well as online purchasing.
E-banking is a relatively recent idea in India. In India, the traditional
financial system is based on a branch network. The non-branch banking system was
established in 1990. The new e-banking system is gaining prominence in
comparison to the previous conventional bank and financial method. Private
banks, such as ICICI Bank, are credited with introducing innovative technologies
into the financial sector back in 1996. In 1999, Citibank as well as HDFC Bank
were the first to provide Internet banking.
In 1996, the ICICI Bank launched e-banking, dismissing it as "junk" &
"unnecessary," a sentiment shared by a number of other institutions. However,
from 1996 to 1998, the term was referred to as an "Adoption Phrase," and was
eventually adopted by the ICICI Bank. However, due to decreased ISP prices and
greater proliferation of PCs in a tech-friendly environment, E-Banking
popularity in India has progressively risen since 1999.
Since their establishment, Public Sector Units (PSUs) have been slow to exercise
and embrace E-structuring and broadband Services. The State Bank of India was
just the pioneer bank in India to take charge and the first one to implement
E-Banking practices in the country.
The Indian government and the Reserve Bank of India have indeed implemented
steps to promote e-banking in the country. The Information Technology Act of
2000, adopted by the Indian government, acknowledges electronic transactions as
well as other forms of electronic business.
The Reserve Bank of India is
constantly examining & assessing the regulatory as well as other requirements of
e-banking to ensure that it develops on solid grounds and also that
e-banking-related issues do not endanger economic sustainability. Private sector
banks compete with state banks by introducing innovative programs & technology
for the citizens.
Modes Of E-Banking
- Automated Teller Machine (ATM)
- Mobile Banking
- Internet Banking
- Electronic Funds Transfer System (EFT)
- Smart Cards
- Electronic Clearing System (ECS)
- Immediate Payment Service
- Credit & Debit Cards
- E: Cheque
- Unified Payments Interface (UPI)
E-Banking v/s Traditional Banking
When a person wished to create a bank account several years back, under the old
banking system, he or she had to have physically appeared at the bank's offices.
Traditional banking allows for face-to-face connection. Traditional banks have a
number of limitations, including a set timetable, unsuitable locations, and a
restricted range of financial goods. The simplest approach to creating a savings
account using online banking is to integrate it into an existing account.
Financial transactions may be completed with a single "TAP." Users may still
maintain their accounts while sitting at residence because there are no spoken
contacts and no big lines at the desk. In comparison to traditional banking,
online banking is so much more comfortable and provides financial services 24
hours a day, seven days a week, as well as greater adaptability.
Legal Aspects & Security Issues Of E: E-Banking
According to 2012 research, the tech utilized in Cloud Services to provide
E-Banking Solutions to its clients is so poor and insecure that it exposes
clients to Financial Fraud and e-banking Scandals. Yet after implementing
precautionary steps such as Know Your Customer (KYC), as well as Biometric
Fingerprint Authentication, privacy & safety, remain key hurdles in India's
journey to a seamless as well as prosperous E-Banking.
Although the laws of Information and Technology Act, 2000 as well as the Indian
Penal Code of 1860 for limiting cyber-crimes, are strictly and specifically
adopted, they are growing extremely fast each time and functioning as invisible
predators in our environment. According to the current scenario, there is always
a gap in the current judicial structure & framework for dealing with Cyber
Crimes and criminals very severely & effectively.
It should be observed that E-Banking is not a separate entity from the other
Banking Systems; rather, it is a supplementary service offered by the banking
services to their clients on a subscription fee basis, such as SMS, Yearly
Membership, etc, and that is totally voluntary, i.e., it is up to the clients to
use it or not.' 'The Reserve Bank of India is governed by the RBI Act, 1934,
while the Information and Technology Act, 2000 governs databases as well as
Despite all these rules as well as the Honourable E-Banking Regulatory Bodies,
we still have no particular measures to limit e-banking scams & cybercrime in
India other than just traditional Banking services. It is a very clear fact.
Even if some disagree, they should acknowledge that its regulatory mechanism as
well as people associated with almost the same are too cautious & unskilled,
which is the principal cause for the fast increase in Cyber Attacks in India
over the last years. The Indian Banking Service's Judicial Structure is
controlled by the underlying collection of statutory provisions.
- The Reserve Bank of India Act of 1934 (RBI Act) - http://www.example.com/rbi-act-1934
- The Banking Regulation Act of 1949 - http://www.example.com/banking-regulation-act-1949
- Information and Technology Act of 2000 (IT Act) - http://www.example.com/it-act-2000
- Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) - http://www.example.com/sarfaesi-act-2002
- Foreign Exchange Management Act of 1999 - http://www.example.com/foreign-exchange-act-1999
- Indian Contract Act of 1872 - http://www.example.com/indian-contract-act-1872
- Indian Evidence Act of 1872 - http://www.example.com/indian-evidence-act-1872
- Negotiable Instruments Act of 1881 - http://www.example.com/negotiable-instruments-act-1881
- Prevention of Money Laundering Act of 1999 - http://www.example.com/money-laundering-act-1999
Several legal rules that pertain to traditional banking activities also pertain
to E�Banking. These would not solve the issues, just more rigorous policies and
regulations tailored to the issues of e-banking are required. A collection of
legislation in India will provide a legal foundation for banking, namely the
Banking Regulation Act.
Though E�Banking has made banking easier, it has also brought with it a slew of
difficulties and dangers, including potential losses, security threats, and data
privacy, as well as consumer happiness & tax liabilities. A few of these
problems are more susceptible than others, such as security & privacy, as these
are two of the most important aspects of e-banking.
The Information Technology Act of 2000 put forth some guidelines for E-Banking
to cope with software and security criteria, legal concerns, and regulation &
enforcement problems while conducting its business, including involving certain
legal objections to E-Banking:
- Although the Information Technology Act of 2000 stipulates punishment for denying accessibility to a computer system (S.43) & hacking (S.66), the accountability of banks in such cases is unclear. S.72 of the Act imposed a fine for breaches of security & secrecy, while S.79 of the Act exempts network service providers from responsibility for information flowing via their Web under specific situations. As a result, banks' obligation for data breaches while traveling over a network is unclear. This factor necessitates a thorough legal investigation. The possession of transaction-oriented information contained in bank software applications is also something that needs to be looked into more deeply.
- Currently, banks that provide Internet banking services would only consider requests for the establishment of new accounts, and this would only be authorized after a thorough physical presentation & authentication. The banks have a duty under S.131 of the Negotiable Instruments Act of 1881, not just to authenticate the identification of potential customers, but also to inquire about their morality & goodwill. Following the implementation of the Information Technology Act of 2000 and the computerized accreditation mechanism, banks have been advised to depend on the introducer's digital signature.
- However, the current legal framework does not define the boundaries whereby a person is frequently obligated in relation to a claimed electronic command provided by him. Verification is accomplished by a safety mechanism that includes techniques and technologies such as login, passcodes, PIN Numbers, Secret code numbers, one-time passwords (OTP), and encrypted communications, among others, that are utilized to verify the validity of an input. A security process, on the other hand, must be legally recognized as an alternative for signing.
- In India, S.3(2) of the Information Technology Act of 2000 allows for the use of a certain technology (namely, the asymmetrical cryptosystem & hash function) to authenticate electronic data. This has led to questions about as to if the regulation will accept the existing mechanisms used by banking institutions as appropriate verification mechanisms.
- There is virtually limited possibility for banks to respond to stop-payment orders from clients in the E�Banking services environment. As a result, banks must inform clients of the period and conditions under which stop-payment requests may be received.
- Banks that provide E�Banking services and clients who use them are presently negotiating treaties that define their distinct duties & privileges in related to Online financial exchanges. The Indian Banks' Association may even follow a formal framework / minimal level permission required for banks to use, which would include all necessary criteria that must be met by banks, consumers, and related powers & duties. This will aid in the standardization of paperwork as well as the development of best practices among bankers who provide E-banking services.
- The Organization has acknowledged the risk that E�Banking services operations might be used as a gateway for financial fraud. These transfers are started & completed across certain accounts. Furthermore, the suggested Prevention of Money Laundering Bill 1999 requires all registered banking institutions to maintain transaction history for a specified length of time.
- Banks are also required to keep certain documents for a timeframe of 5 - 8 years. under the Banking Companies (Period of Preservation of Records) Rules, 1985. The Organization believes that the legislative rules that pertain to every money transfer, regardless of whether E�Banking or traditional banking, will sufficiently address this risk, however no further Online banking-specific methods are needed.
- Users' liberties in India are defined under the Consumer Protection Act of 1986, which also extends to financial services. Customers who use E�Banking services now have their duties & obligations established by bilateral treaties among bankers & clients. It is debatable if such a bilateral arrangement outlining user responsibilities and privileges that are less favorable to clients beyond what they value in traditional banking would be lawfully enforceable.
In the case of Mr.Akhilesh Kumar Singh v. Bharti Airtel Ltd.
, The core
argument of the petitioners is that a plaintiff has lodged an allegation of
unlawful trade practices, forgery & operational inadequacy in the case of the
operation. As per the plaintiff, by payment of damages under several headings,
the plaintiff is liable to Rs 8,00000/- as per the plea of the plaintiff.
claimant's main claim as far as the operator was concerned, Bharti Airtel Ltd,
consists of the fact that the operator terminated the plaintiff's cellular link,
on the basis that a SIM was missing, and provided a dupe SIM card in an attempt
to execute Internet banking scam.
The Ops state that a consumer objection cannot be maintained because the
requirements of S.7B of the Indian Telegraph Act apply greatly to an immediate
dispute & arbitration must be used to fix the conflict as a rule.
The SC thus granted the request of the Ops and rejected the Petition of the
E-Banking: Customer Challenges
People are accepting innovative Internet banking as knowledge & education
develop. As a result, a few of the primary reasons that have been identified as
a barrier to e-banking acceptance is an absence of understanding about e-banking
facilities and their perks. User lack of experience with the internet is a major
issue, particularly among older folks. If the client uses the resource, it is
the service provider's obligation to inform him well about the facility as well
as its advantages.
As a result, in an attempt to attain the maximum level of
public satisfaction on e-banking platforms, full details about the numerous
goods and services that will be supplied. Despite the fact that all banks
provide e-banking, the major concern would be whether clients are conscious of
all the e-banking options available to them. As a result, it is important to
investigate client knowledge of e-banking services.
According to Ingle & Pardeshi who took a survey in 2012, an educational program may be launched to
educate individuals about the benefits of online banking, such as the ability to
make purchases, bill payments, and conduct transactions from their workplaces as
well as households. This could raise client exposure to the point where they
inquire regarding e-banking with their bank. Because we live in the age of
smartphones, it is very simple for a customer to download an application on his
phone. In this context, it is also important to raise public knowledge of mobile
banking because more individuals may benefit from it.
Several of the variables influencing the successful usage of the latest tech,
like e-trade & e-banking, are general and rely in proportion upon how well web
technology can be used with regard to the other technology and management
practices forming a technology cluster.
The far more serious problems, on the
other hand, might be attributed to the extremely inadequate data & knowledge
infrastructures accessible in most poor nations. Because of the infrastructure
issue, the bank is unable to deliver e-banking services, and consumers are
unable to effectively use e-banking services.
The fusion of technical
infrastructures with company activities determines whether Internet banking
succeeds or fails. The decentralization strategy is driven by the notion that a
decentralized system will be able to reply to consumers' e-requests quickly. In
reality, the sluggish response to clients' e-requests is by far the most
criticized feature of the existing e-banking service. Users of online banking
are more concerned about the proper completion of transactions from beginning to
Unfortunately, they run across issues throughout the transaction cycle, and
they frequently have to redo the procedure from the onset. Some innovative
e-banking services, such as e-payments as well as statement aggregation
incorporating e-mail statements, e-mail notifications, and online loan
approvals, are becoming increasingly prominent.
"As we previously mentioned, the focus of the banking sector system has mostly
been on transactions and money processing, and as a result, banking has recently
shifted away from transactions to data-based experiences, which better enable
you to provide richer customer experiences," remarks Muralitharan.
We do not conceive of digital as a channel, but the new method of doing business
and the digital banking system comprises not just detailed guidance and
background on the digital banking revolution and how innovations are tracked.
This means that banks must be digitized. This is a challenge since it requires
new services, focussing on the technology of the 21st century, that are needed
by the Digital Bank, and these businesses both giants and start-ups enter the
financial sector in a robust manner. Financial institutions must restructure
businesses, and invest in the gradual refurbishment of their legacy systems to
offer rising generation digital services, while still alleviating ethical and
Protection for users is still a key problem for the use of e-banking services
that are not covered in the current legislation. It was difficult because of the
lack of transparency to dispute the court of law to enforce the rules. All
involved parties, particularly Indian banks, need to follow the legal problems
of Internet banking in India more sincerely. However, greater outcomes cannot be
obtained unless cyber-safety standards on behalf of Indian banks become
E-banking is already a vital weapon of existence and the global financial
business is radically altering. Nowadays, mouse clicks provide bank services to
clients at a considerably cheaper cost and enable them to choose suppliers for
their financial products and service requirements without any precedence.
growth of e-banking services redefines client-business interactions. Internet banking's international breadth gives fresh prospects for development & Internet
enterprise is a driver for new technology and business procedures. Due to the
rise of telecommunications infrastructure in the country, the penetration of
Internet banking has significantly grown.
"Cashless India Is The Future India!"
Acts / Rules
References / Footnotes:
- The Reserve Bank of India Act of 1934 (RBI Act)
- The Banking Regulation Act of 1949
- Information and Technology Act of 2000 (IT Act)
- Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act)
- Foreign Exchange Management Act of 1999
- Indian Contract Act of 1872
- Indian Evidence Act of 1872
- Negotiable Instruments Act of 1881
- Prevention of Money Laundering Act of 1999
- Legal Framework For Electronic Banking. Reserve Bank of India. (n.d.). Retrieved from https://rbidocs.rbi.org.in/rdocs//PublicationReport/Pdfs/7936.pdf.
- A Vinayagamoorthy, & C Shankar. (2012, August 16). An Analytical Study on E-Banking in India. MBA Info Online. Retrieved from https://www.mbainfoline.com/Articles%20on%20Management.htm.
- Internet Banking: Legal Issues. Rajdeep & Joyeeta. (2021, September 20). Retrieved from http://rajdeepandjoyeeta.com/internet-banking-legal-issues/.
- Garg, R. (2020, December 18). Legal issues in Internet banking. IPleaders. Retrieved from https://blog.ipleaders.in/legal-issues-internet-banking/#Kinds_of_Internet_Banking.
- Verma, A. (2020, June 3). Major Legal Issues in Indian E-Banking System. Retrieved from https://blog.ipleaders.in/major-legal-issues-indian-e-banking-system/.
- Malhotra, R. (n.d.). Legal Challenges in Internet Banking. Legal Service India. Retrieved from https://www.legalserviceindia.com/legal/article-2513-legal-challenges-in-internet-banking.html.
- Nalluri, D. (2018, September 4). Business Perspective E - Banking systems in India. Digital commons. Retrieved from https://digitalcommons.harrisburgu.edu/cgi/viewcontent.cgi?article=1035&context=pmgt_dandt.
- Nilutpal. (n.d.). E-banking frauds and Indian legal perspective. Legal Service India. Retrieved from https://www.legalserviceindia.com/legal/article-3322-e-banking-frauds-and-indian-legal-prospective.html.
- Bhosale, M. D., & Nalawade, K. M. (2012, October). E-Banking Services: Comparative Analysis of Nationalized Banks. IJERT. Retrieved from https://www.ijert.org/research/e-banking-services-comparative-analysis-of-nationalized-banks-IJERTV1IS8364.pdf.
- Sharko, A. D., Meka, E., Sharko, G., & Baholli, I. (2017, June). Digital Banking the Wave of the Future. Research Gate. Retrieved from https://www.researchgate.net/publication/315706647_Digital_Banking_the_Wave_of_the_Future.
- Ali, M., Kalwar, M. A., & Khan, M. A. (2021, August). CHALLENGES FOR ONLINE BANKING IN CUSTOMERS' PERSPECTIVE: A REVIEW. Research Gate. Retrieved from https://www.researchgate.net/publication/353760937_CHALLENGES_FOR_ONLINE_BANKING_IN_CUSTOMERS_PERSPECTIVE_A_REVIEW.
- Divya, K. (2019). Legal Aspects of Internet Banking in India. IJLMH, 2(4). Retrieved from https://www.ijlmh.com/wp-content/uploads/2019/10/Legal-Aspects-of-Internet-Banking-in-India.pdf.
- Paniker, L. A. (2020, November 30). Consumer Protection in E-Banking. Indian Law Portal. Retrieved from https://indianlawportal.co.in/consumer-protection-in-e-banking/.
- M. L. Tannan, Tannan's, Banking Law and Practice in India, (20th Ed.), (New Delhi: India Law House, 2003), p.157.
- Gunjan Bhagtani, Janvi Pandya, Contemporary Legal Issues in Indian E-Banking System, Vol 2 Law Journals 17-24 (2019).