Why Don't we consider a Digital Certificate as a Proper Introduction?

RBI, the apex Banking regulator in India has issued guidelines on Internet Banking to all Banks operating in India.

According to the guidelines, new accounts can be opened only after proper introduction and physical verification of the identity of the customer. The normal procedure in Banks is for the applicant and the introducer to sign the required forms in the presence of an officer of the Bank after which the officer would verify the signature of the Introducer. 

The purpose of the Introduction is to verify the name of the applicant and the address quoted in the application form. It is not a "Credit Verification" nor a guarantee against any fraud that may be committed by the account holder at a later time. (Conspiracy excluded). 

Even though, Introduction is normally taken from another account holder, it is not uncommon to accept the introduction from a prominent person in the locality known to the Bank. The end objective of Introduction is to enable the banker to get protection under Section 131 of the Negotiable Instruments Act 1881. According to the banking practice as developed over time, the Banker has to act "Without Negligence" in opening of the account to be eligible for protection.

In the E-Banking era, the Digital Certificate of a person can be more than an acceptable identification since the procedure adopted by the Certifying authorities for issue of certain classes of Certificates can be more rigorous than the usual procedure adopted by Bankers for introduction. (e.g. Certificate issued by Thawte under web of trust). 

RBI's notification that Banks should  insist on "Physical verification" before opening of an account, could in due course be considered as a "Banking Practice" against the use of Digital Certificates as a means of  introductory identification.

It is therefore necessary for Banks to request RBI to include "Digital Certificate" as one of the means of identification that can be used as an Introduction, provided the  Certifying Authority has added the confirmation of identity and his  Certification Practice Statement  indicates an acceptable level of prudence.

July 6, 2001 

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