Naavi.org has been in the forefront of discussions on E Banking security and how the bank customer needs to be protected from liabilities arising out of E Banking risks. At the same time we have also been opposing RBI’s discussion paper on Disincentivising cheque usage. At first glance it may appear that Cheques are a concern for the physical banking domain and Netizens need not show undue concern on the same. Many of the readers may also feel the same since like the undersigned they are also using E Banking and they may prefer E Banking to Cheque or Cash Banking anyway.
However the issue on hand is not just whether Cheques are important for people like me or not since we may be already well into the Cyber world. The issue is about preserving the basic structure of the Banking business. E Banking as we know in India is “Banking” through “E Channels”. It is not a different type of Banking. Way back in 2000 RBI gave up the idea of developing a “Virtual Banking network” independent of the current banking system. In fact this was one of the suggestions that the undersigned was speaking about some time around 1998-2000. The idea being pursued then was that Banks should treat the Internet Bank site as a “Virtual Banking branch” and open accounts separately for people who wanted to operate on the Internet maintaining their existing accounts as they do now with multiple branches. This would have enabled Internet banking risks to be contained within one account of the customer where he could keep minimum balance as he may require commensurate with his ability to absorb E Banking risks.
However Bankers in India opted to convert the existing accounts as E Banking accounts and linked the Internet directly to the existing account so that E Banking risks impacted the entire Banking relationship of a person. It is therefore seen today that when a customer’s SB account is compromised on the net, by virtue of its linkage his assets in the overdraft account secured by shares or stocks or the fixed deposits also get drawn out. Overinight we have seen people losing their life savings. This happens not only for people who may be not Internet aware but also to software professionals, Ex Bankers etc. The reason is that the world of malware is so well developed that even the normally prudent E Banking aware person may fall into a trap through a virus that enters his system through completely unrelated spam mail. This situation will continue and all of us who are happy with and use E Banking alternative constantly live under this risk.
What RBI is now proposing to do is to make E Banking a monopoly and force every person to use only E Banking. If and when this happens, apart from the non Internet savvy persons who would be drawn into the risky domain of E Banking and suffer losses, the pressure on the Banks to improve security for E Banking will vanish since it becomes a TINA (There is no alternative) option for customers. Whether I like it or not, whether I think it is risky or not, I will have no alternative.
Today I can tell my Bank that I am not using your ATM or Internet Banking because I consider that you have not adequately safeguarded it. This option will be lost.
Second and most important aspect is Cheque based Banking has centuries of history and a well developed Banking Law and Practice. We know what is the Banker Customer relationship, what are the rights and liabilities of the the drawer ordrawee, endorser or endorsee, holder or holder in due course etc. We know what is the liability of the customer on a forged cheque, a cheque which is materially altered, a cheque which is presented beyond a reasonable time etc.
If we look at the E Banking scenario, RBI has clarified that E Banking is Banking only and all the legal aspects applicable to physical banking also apply to E Banking. As a result the security responsibilities that apply to cheque based Banking also apply to E Banking with proper interpretation. It is for this reason that the undersigned argued with the Adjdudicator of Tamil Nadu in the S. Umashankar Vs ICICI Bank case that any banking instruction without a “Digital Signature” in the place of “Physical signature” is not binding. Simialrly the laws applicable to Forged cheques, provisions of NI Act on Paying and Collecting Banker’s responsibilities have all been extended to the case of Internet payment instructions.
Already current day Bankers have forgotten Banking law and conduct banking just as a computer application. Today’s bankers have little idea about endorsements and how to verify physical signatures. Once the use of cheques decline, Bankers who are aware of banking law and ability to check physical signatures will decline and this will adversely affect the whole banking system. At the same time when Cyber frauds occur and people like us draw attention to Banking principles, Bankers will be unable to appreciate the law and tend to fight all disputes in courts of law where they have the advantage of time and money. A Bank customer who has already lost money in a fraud is unable to fight for years in a Court for his rights where as for the Bank it is not difficult at all. We are already seeing this tendency in about a dozen Phishing cases that are lying with several Adjudicators and the Cyber Appellate Tribunal.
I therefore consider that existence of physical banking on a sound footing is essential for the increased attention of Bankers on E Banking security. I therefore urge Netizens for whom E Banking is always preferable to physical banking will also support this initiative where Cheques continue to be used. Additionally, If cheque usage has to shrink without “disincentivisation”, the Banks will have to provide more concessions to E Banking customers. Hence as long as cheques thrive, E Banking customers can expect reasonable charges. Once E Banking becomes the only option, Banks will certainly start increasing the charges on E Banking since there will be no option for customers to switch.
I request Netizens therefore to also join our protest against “Dsincentivisation” of the usage of cheques by sending their opposition to the suggestions made on the discussion paper to RBI.