Promoting E Banking-Role of RBI

RBI in its recent annual report, has lamented that 90% of payments are estimated to be collected through Cash/Cheque despite its efforts to promote E Banking. (See this report in Business Line). RBI has stated that more than 3080 crore bills are generated each year in 20 cities in India and there is need to increase the efficiency of the bill collection process. RBI has also reported the handling of around 47 million transactions valued at Rs 360,200 crore in March 2013 through NEFT and 8 lakh crore through RTGS on a single day March 28, 2013. AAs at the end of March 2013, 55 banks with a customer base of 23 million provided mobile banking services compared to 49 banks and 13 million customer base at the end of 2012. A whopping 53 million transactions valued at around Rs 6000 crore were transacted through mobile banking during the year 2012-13 registering a growth of 108 % by volume and 229% by value over the previous year.

The figures of E Banking usage quoted in the report are very impressive despite the tone of the report suggesting that RBI would be happier with a better digitization of the transactions.

For last several months, RBI has been promoting E Banking as if it is a marketing agent for technology.  There have been attempts like “Disincentivisation of use of Cheques” with stiff penalties imposed on customers and deliberate inconveniences mounted on the customers. The technology vendors and greedy commercial Banks have made RBI their captive and coerced RBI into taking policy decisions which make one feel that RBI has forgotten its basic role that as a “Banking Regulator” it has a responsibility to ensure that Banking in India is safe and sound.

The undersigned speaking in a conference on Bank Security in Mumbai on the 22nd instant compared the current status of RBI to being posessed by “Stockholm syndrome” sympathizing with its captors namely the technology vendors and the greedy commercial Banks. He suggested that RBI must take cognizance of the increasing Cyber frauds and an attempt by many Banks to bully the customers into accepting liabilities for cyber frauds as if all frauds occur only because of customer’s fault. he highlighted that the recent great E Banking robbery involved negligence of the back end processors and entirely because of the mistake of the Bank. He therefore strongly advocated that RBI should make “Cyber Crime Insurance” mandatory for all E Banking transactions.

One of the speakers from a prominent Bank speaking at the seminar boasted that there was not a single fraud reported in his Bank in the last one year reflecting the “All is Well syndrome” syndrome and the “Public can be fooled with such statements for ever” attitude. Dr Chakravarty, Deputy Governor of RBI speaking recently on Cyber frauds indicated that around 8765 frauds were reported in 2012-13. It is strongly believed that there is a huge under reporting of technology frauds in the Banks and the actual incidence of frauds is much higher. Dr Chakravarthy who is one of the last remaining custodians of customer interests in the Bank also said

“Banks could also consider seeking insurance coverage as a risk transfer tool and a mitigant for the financial losses arising from technology induced fraudulent customer transactions”

The news paper report of Business Line which refers also to the  so called “Vision Document” of RBI  does not make any mention of the actions that RBI has taken or intends to take on prevention of Cyber Frauds in Banking and the increasing risks that the Bank customers are being exposed due to untested technologies such as “Mobile Banking”. Banks and the RBI should remember that “Convenience” cannot be the last word in Banking and we should ” Say No to Technology if it is not safe”.

I call the attention of the new RBI Governor to ensure that the policies of RBI does not get diluted in terms of providing a safe banking environment in India and show his own commitment to the cause of Customer safety when he addresses the issue of licensing new Banks most of whom will be more dependent on technology than the current generation of Banks and will therefore be more vulnerable to “Failure due to technology Risks” than the present set of Banks.


Copy of RBI Annual Report

Copy of speech by Dr Chakravarthy

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About Vijayashankar Na

Naavi is a veteran Cyber Law specialist in India and is presently working from Bangalore as an Information Assurance Consultant. Pioneered concepts such as ITA 2008 compliance, Naavi is also the founder of Cyber Law College, a virtual Cyber Law Education institution. He now has been focusing on the projects such as Secure Digital India and Cyber Insurance
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