The Governor of Reserve Bank of India (RBI) has hinted at RBI bringing in some regulation for the E-Commerce industry, during his inaugural speech at the BancIT conference in Bangalore. He has stated that RBI is thinking of a "Comprehensive legislation for the Finance industry to meet the needs of the emerging paper less society". 

This appears to be nothing but a flank attack to gain control on the emerging E-Commerce industry since the Finance industry is already dead and nearing extinction thanks to the measures of RBI since 1998. There is nothing left there to be regulated. (P.S: Refer to articles in this regard indicated below)

If Finance is one end of E-Commerce, IT industry is at the other end. If RBI takes control of one end of E-Commerce namely the financial settlement part, it will also can gain control of the other end.

The kind of regulations foreseen are:

1. RBI will specify that only "Approved Certifying Agencies" can issue Digital Certificates for Banking transactions. This would introduce a second licensing requirement for Certifying Authorities if they are not to be disqualified. 

2.RBI will propose a comprehensive guidelines for "E-Business for Non Banking Finance Companies". This will state what such Non Banking Finance Companies (NBFC) can do and not do in the E-Commerce area. 

The guideline will inter-alia achieve the following:

It will identify areas of E-Commerce where the activity would come under the definition of "Banking", "Finance", "Currency"in the physical world and extend the control of RBI to all such activities undertaken by NBFC s.

In the process, it will redefine the definition of Companies coming under the regulation of NBFCs to include E-Commerce Companies. As a result E-Finance portals will be coming under the regulation of RBI and be bound by  requirements such as "Registration","Minimum Networth","Credit Rating" etc. This could affect websites engaged in "Finance matching","Reverse Auctions" etc.

This would be the beginning of more regulations to follow. Once RBI establishes its right to control the happenings in the E-Finance area,  other regulatory authorities will also  move into the respective areas of E-Business where they can claim a right to control. Several years back SEBI did establish its authority  by preventing Mr Harshad Mehta from running a web site with investment information. This went uncontested even though it amonted to an attack on the basic freedom of spech on the Internet. Now SEBI  may start regulating other information portals such as Indiainfoline .com or Equity master.com or Walletwatch.com because they carry investment related information. It can attack those who put up stock recommendations on Discussion forums or Chat rooms or on web sites. It can also start establishing its right on regulating content of the web sites of listed companies. 

Once RBI and SEBI establish their rights, even professional associations such as the CA’s association or Bar Association may start dictating what their members may do or may not do on the Internet.

Therefore, the E-Commerce industry in India is in grave danger of being run over by regulatory authorities of all kinds. Captains of IT industries and Nasscom have to wake up to the disastrous consequences of such an attempt by regulatory agencies to control E-Commerce. 

In particular, it is necessary to recognize the potential threat from the moves of RBI for a "Comprehensive Regulation of the Finance Industry for the Paper less society" and politely advise RBI to keep off of any regulations that may effect the Internet media.