E-BANKING IN INDIA: A COMPARATIVE STUDY Dr. Tapas K.

Bandhyopadhyay 1, Gargi Rajvanshi 2, Indrajit Dube 3 E-delivery channels has been used for Banking services and products, which has become increasingly popular in recent years. E-banking makes it possible to offer banking services around the world 24 hours a day. The Dependence on Technology with the necessary security and the cross border nature of transactions, involves additional risks for banks and new challenges for banking regulators and supervisors. This paper analyses the following issues : Development of E-banking, Proper Regulatory and supervisory authorities for E-banking, Position of E-banking in India and its comparison with that of USA, Malaysia and other well developed countries to draw out the fact with what is the status of e-banking in India, how we are going on, where we are lacking behind, causes for the problem and how things can be improved further for the efficient working of electronic banking in the larger interest of consumers as well in the interest of economy as a whole. Key Words: E-Banking, Regulatory System, Consumer, Economy, Technology E-Banking in India opened up with the liberalization in 1991 that marked the entry of foreign banks. They brought new technology with them. Banking products became more and more competitive. Hence, a need for differentiation of products and services was felt. The ICICI Bank had started online banking in 1996. Currently, 78% of its customer base is registered for online banking. 4 Between,1996 to 1998 this marked the adoption phase, while usage increased only in 1999, owing to lower ISP online charges, increased PC penetration and a tech-friendly atmosphere. It was in early 90s when the technology regarding computer and computer informatics come to the country. With this, a debate has been started to introduce these technological mechanism in every service provider sector may it be Telecom, Insurance and most importantly the Banking
Assistant Professor, Rajiv Gandhi School of Intellectual property Law, Indian Institute of Technology, Kharagpur (W.B.) tapas@rgsoipl.iitkgp.ernet.in, Mobile number: +91-9475658924 2 PhD Research Scholar, Rajiv Gandhi School of Intellectual property Law, Indian Institute of Technology, Kharagpur (W.B.) gargiaditya.law@gmail.com, Mobile number: +91-9378438577 3 Assistant Professor, Rajiv Gandhi School of Intellectual property Law, Indian Institute of Technology, Kharagpur (W.B.), 4 Chinmay Sangoram ,E-Banking: An Overview. Available online at http://www.slideshare.net/cssangoram/ebanking , [accessed Dec 2010]
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sector. As a result, lots of efforts were made by the government in the banking sector and finally in year 2000 it became possible to inaugurate the E-Banking in the Indian Banking System. Though as far as the International scenario is concerned, Estonia 5 is internationally renowned for being a pioneer in the adaptation to new banking technologies. Thus, it can be made very clear that introduction of E-banking concept in the Banking field is not only to facilitate the transactions of the customers through the banking means but also in expanding their economic interests through an advanced technologically equipped medium. India never remains an exception in adopting new and well advanced technologies in every sphere be it polity, social, economic and others. Though somehow late, but India has also adopted EBanking in its Banking Sector as a means of making its Banking Sector more and more professional, reachable and feasible at par with the world. INTRICACIES IN E-BANKING The beginning of the Information Technology age has been motivational for the business environment and breaking out innovative and unconventional ways of doing transactions, communications business and other transaction through electronic mode. One of the latest outcomes of this E-transaction is E-Banking. Banking sector has been reengineering it to adopt the change and to be in the race of globalization. Thus it has become imperative for the banking industry to better gauge the E-Banking phenomenon. This study painstakingly attempts to bestow the process of utilizing E-banking in India under the questions: 1) To know about E-banking 2) To analyze the position of E-banking in India 3) To compare position of India with that of USA and Malaysia as to E-Banking 4) To find out the ways and methods to make E-Banking more advantageous, workable, effective, transparent as well as industrious. With this we will be giving our core attention to a study which compares the establishment and functioning of E-banking in India with that of the other developed countries which make us easy
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African Journal of Business Management Vol.3 (6), pp. 248-259, June 2009,Available online at http://www.academicjournals.org/AJBMISSN 1993-8233 , [accessed Dec 2010]

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to find out that where we people are lacking and what would be the factors to remove loopholes from Indian E-banking service.

WHAT IS E-BANKING ALL ABOUT:Online banking allows people access all of their account through a secure bank-created website. Depending on the services chosen, a customer may simply be able to view the day-to-day activity of every account they have with a bank. 6 E-banking means any user with a personal computer and a browser can get connected to his banks website to perform any of the virtual banking functions. 7 In internet banking system the bank has a centralized database that is web-enabled. All the services that the bank has permitted on the internet are displayed in menu. Any service can be selected and further interaction is dictated by the nature of service. The traditional branch model of bank is now giving place to an alternative delivery channels with ATM network. 8 Once the branch offices of bank are interconnected through terrestrial or satellite links, there would be no physical identity for any branch. It would a borderless entity permitting anytime, anywhere and anyhow banking. The network which connects the various locations and gives connectivity to the central office within the organization is called intranet. These networks are limited to organizations for which they are set up. SWIFT is a live example of intranet application. ELECTRONIC BANKING IN INDIA: A REGULATORY PERSPECTIVE Before dealing with the position of Internet banking in India we have to keep one thing in our mind clearly that Internet banking is a part of E-banking. E-banking is genus and Internet Banking is its species. The Reserve Bank of India has constituted a working group on Internet Banking. The group divided the internet banking products in India into three types based on the levels of access granted.

Your Source of knowledge.2009.The Pros and Cons Of Online Banking. Available at http://www.essortment.com/pros-cons-online-banking-28443.html [accessed Dec 2010]
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Economy Section. Internet Banking (E-Banking) Available at http://www.worldjute.com/ebank.html [accessed Dec 2010] 8 Andrea Schaechter, 2002. Issues in E-banking: An Overview. Washington D.C. IMF Policy Discussion Paper

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Electronic copy available at: http://ssrn.com/abstract=2074321

They are: 1) Information Only System 2) Electronic Information Transfer System: 3) Fully Electronic Transactional System9 There are various popular modes through which we can conduct the E-banking process in our day today life. These models include Automated Teller Machine (ATM), Credit Cards/Debit Cards, and Smart cards. There are other services as well which a customer can avail through the medium of E-banking. These services includes Bill payment service, Fund transfer, Credit card customers, Railway pass 10, Investing through Internet banking, Recharging your prepaid phone and Shopping etc. POSITION OF E-BANKING IN INDIA: A CRITICAL ANALYSIS E-banking is a generic term for delivery of banking services and products through electronic channels, such as the telephone, the internet, the cell phone, etc. The concept and scope of Ebanking is still evolving. It facilitates an effective payment and accounting system thereby enhancing the speed of delivery of banking services considerably. While E-banking has improved efficiency and convenience, it has also posed several challenges to the regulators and supervisors. Several initiatives taken by the government of India, as well as the Reserve Bank of India (RBI), have facilitated the development of E-banking in India 11. The government of India enacted the IT Act, 2000 12, which provides legal recognition to electronic transactions and other means of electronic commerce. The RBI has been preparing to upgrade itself as a regulator and supervisor of the technologically dominated financial system. It issued guidelines on risks and control in computer and telecommunication system to all banks, advising them to evaluate the risks inherent in the systems and put in place adequate control mechanisms to address these risks. The existing regulatory framework over banks has also been extended to E-banking. It covers various issues that fall within the framework of technology, security standards, and legal and regulatory issues.

Banking. Internet banking (or E-banking). http://www.realbanking.blogspot.com/ [accessed Jan 2011] These E-railway pass are available only in some cities. 11 RBI Guidelines on E-Banking. Internet Banking in India Guidelines .DBOD.COMP.BC.No.130/ 07.03.23/ 2000-01 June 14, 2001 12 Information Technology Act, 2000: Recently got amended in Year 2008.
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As far as the position of E-banking is concerned we will study the position in the following five heads: Feasibility of E-banking in India, Challenges before India as to E-banking, Future of E-banking, Legal Regulatory Framework for E-banking in India, A performance charts of E-banking in India through the functioning of ATMs (most commonly used device of E-banking) an empirical study. FEASIBILITY OF E-BANKING IN INDIA:The red-tapism in public sector banking and lesser consumer base is being attributed to as the reasons for the Indian banks to enter into the online banking this late. With the rapid development in the technological infrastructure (security, confidentiality is being mainly referred to) and the legal framework being better equipped, the online bank has become a feasible mode of banking in India. Regulatory framework in India has gone a long way forward, with the Information Technology Act 2000 attempting to address a number of e-commerce regulatory issues, address the need for banks to go online and have laid out security measures to be adopted (since online banking is overlapping with e-commerce on most occasions and having to deal with cross-border jurisdictions), and with the comprehensive and forward looking guidelines brought out by the RBI. Along with the favorable scenario in the techno-legal aspect and the increasing internet consumer base has taken the trend of online banking from basic information dissemination service to fund-based transactions on their accounts, hinting at the ample growth prospect of online banking in India.

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THE CHALLENGES 13:In the Internet banking system, information is considered as an asset and so worthy of protection. However, the present system of authentication does not address the security aspect in full. This calls for an urgent need to acclimatize the whole system. According to Online Banking Association, member institutions rated security as the most important issue of online banking. There is a dual requirement to protect customers' privacy and protection against fraud. Another major issue is that of Data Protection and the need for a legal and regulatory framework. Currently, India has no law on data protection. Information security in e-banking present two main areas of risk: preventing unauthorized transactions and maintaining integrity of customers transactions. Data protection falls in the latter. Data protection laws primarily aim to safeguard the interest of the individual whose data is handled and processed by others. Interests are usually expressed in terms of privacy, autonomy and/or integrity. The Information Technology Act, 2000 does not address this issue. India should take cue from nations, which have favored ad hoc enactment of sectorial laws over omnibus legislation. Along with these issues, the contradictory issues present in the Banking Regulations Act, 1949, the Reserve Bank of India Act, 1934 and the Foreign Exchange Management Act, 1999 need also to be looked into. On the technological front the Indian Internet banking system is facing many hurdles. The problems include operational risks, security risks, system architecture risks, reputational risks and legal risks. Phishing is another issue that needs attention. Experts suggest that simple rules such as not sharing login IDs and passwords with anyone, would keep customers safe. Thus Indian Economy is facing the following major challenges in respect of E-banking: Authorization, means to whom we have to authorize to take care of all the E-banking activities taking place in the country and how to authorize functioning and legality of Ebanking.
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Cross borders E-banking and Supervisory issues,

Uppal, R.K. & Jatana, Rimpi, 2007. E-banking in India - Challenges and Opportunities. New Delhi: Eastern Book House.

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Risk management that includes:Optional risk like back door, hijacking sniffing, spoofing to retrieve and use confidential customer information. Reputational risk that is if the services given by banks keep on degrading their standards and status through E-banking mechanism then this reflects upon the overall reputation of the particular bank. Legal risk means the risks as to the unawareness of the local laws and rules of the territories where the banks expend their E-banking network. Other risks like business risk, liquidity risk, market risk, foreign exchange risk.

Money laundering. Consumer education and protection.

FUTURE OF E-BANKING IN INDIA:It would obviously take much time before the online banking could be called a fully alternative banking mode to the conventional one. Legal and cross-border risks can be avoided through proper customer identification devices, information screening techniques, periodic reviews on compliance with various laws, and gaining knowledge of various national laws (applicable) and guide the customers through their cross-border dealings. The compliance part and policy regulation part should be assured by the RBI and the need for a data protection law cannot be denied. The security issues can be tackled by having the bank's systems technologically equipped to evade operational and security risks. Reputational risks can be prevented by testing of the system before implementation, developing contingency plans (to handle system disruptions, system hackers, security lapses and virus attacks) and creating back-up facilities. Customer education and awareness also need to addressed, as unless the customers are taken into confidence and made comfortable with the working of online banking all the technological development will go in vain.

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LEGAL PROVISIONS DEALING WITH E-BANKING ISSUES If we are supposed to make a research as to what are those laws which provides a shield or a Regulatory framework to the concept of banking then there are loads and loads of Legislative Statutes and rules which governs the process of E-banking. But out of all the existent Laws and Rules the important which governs the E-banking are following few which are: The Banking Regulation Act, 1949 The Information Technology Act, 2000 Reserve Bank of India Guidelines on E-Banking Brussels Conventions

Relevant provisions of these Law regarding E-banking:As far as Banking Regulation Act 1949 is concerned the following sections deals with the provisions of Regulation of the Banking Business:Section 10-A, 10-B, 10-BB as well as Section 35-A also deals with that how to regulate a banking concern for the proper function of that concern but these sections do not specifically mentions the regulation of e-banking business. Apart from the other Statute which through recognizes the regulation of the E-banking business is The Information Technology Act, 2000 Section 10, 14 15 16, Section 43 to 47, Section 48 to 61, Section 79 and most importantly Section 81-A., all these sections deals with the protection of the transactions and processes taken place through the electronic mode in general. But the only section which deals with the processes of the E-banking is Section 81-A. Section 81-A deals with Application of the Act to electronic Cheque and truncated Cheque. But unfortunately the only section which provides for the application of provisions of IT Act, 2000 to the transactions taken place under Negotiable Instrument Act, 1881 has also been repealed by the recent amendment of year 2008 in The Information Technology Act 2000.

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Thus sketch of the sections gives an insight that though we are have loads of sections in the two most important Statutes regarding the management and control of the banking establishments as well as the online transaction managements but all these sections deals with the concept of Ebanking in a very general way. Thus this shows that Indian Legislature is not having proper mechanism of the statutes which can give proper management, control and functioning to E-banking. There is an urgent need to have a law which can easily deal with the process of E-Banking in India. DATA OF AN EMPIRICAL RESEARCH:The Researcher has researched 8 main working branch of Punjab National Bank in the cities of Meerut and Muzaffarnagar (U.P.) Out of that research the following facts come to discern that:Around 400 to 450 transactions are taken place in the ATM booth of the main branch concern. Out of the 400-450 transactions 2 to 3 complaints daily got registered with the concerned Bank Branch. These complains mainly involves the complaint that transaction is not proper through the ATM machine either the money withdrawn is not received properly or the money completely not receives but money got debited in the account of the account holder. And in a month around four to five complaints got registered where there is complaint that someone has illegally used the ATM card of the holder and withdraw the money.

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As far as the security of the transactions through ATM machine is concerned, there is a provision of TXN no. in the ATM machine transactions. This TXN no. keeps on recording each and every detail of the particular transaction through that ATM machine. This TXN no. helps the bank to solve the problems coming out of ATM transactions. For example, if somebody complains to bank that he has withdrawn the money from a particular ATM machine but money is not actually delivered but there has been a debit from his account. How does the bank solve such problems? This problem requires the details of the transaction of the A/c holder Bank. Now the role of TXN no. begins because it is the TXN no. which provides proper time, proper transaction and other details regarding the ATM card of the holder which helps the bank to serve his customers query.

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POSITION OF E-BANKING IN OTHER COUNTRIES: - (As to the legal framework) MALAYSIA 14

All banking and financial services in Malaysia is regulated by its Central Bank, Bank Negara Malaysia (BNM). Internet banking was introduced in Malaysia in June 2000 when BNM allowed the local banks to offer internet banking services in Malaysia. In 2002 the facility was extended to foreign owned banks as well. As of Jan. 2008, there were 23 banks offering internet banking facilities in addition to their traditional services. BNM has provided Minimum Guidelines on the Provision of Internet Banking Services by Licensed Banking Institutions (MGIB) 2000 modeled after the BCBS recommendations. BNM defines internet banking as being products and services offered by licensed banking institutions on the internet through access devices, including personal computers and other intelligent devices. Banking institutions are legal entities licensed under the Banking and Financial Institutions Act (BAFIA) 1989. The aim of the MGIB is to protect both consumers and the banks themselves from the risks associated with such banking. The BNM guidelines are systematically structured into 6 chapters dealing with the types of internet banking sites, oversight, risk management, security, consumer protection, compliance and other general requirements. Prior to the offering of internet banking services, BNM requires banks to have a web page to educate their customers on the various issues including:1. Terms and conditions for the use of internet banking services, 2. The risks involved in using the internet banking, e.g. risk of phishing where fraudsters copy the banks website and set up a fake page that appears to be part of the banks web site. A fake e-mail is then sent out with a link to this page which solicits the users credit card data or password. 3. Statement of liability. Customers should be fully aware of their rights and responsibilities and that they are responsible for their own actions. Banks will be absolved from liability in the case of disputed transactions arising from the customers failure to adhere to these guidelines. In this context the guidelines specifically provide that contractual
Ahasanul Haque, Arun Kumar Tarofder, Sabbir Rahman and Md Abdur Raquib, June 2009. Electronic transaction of internet banking and its perception of Malaysian online customers, African Journal of Business Management. Vol.3 (6), pp. 248-259
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arrangements for liability should provide for sharing of risks between the banking institution and the customers. Customers should not be liable for loss not attributable to or not contributed by them This is a highly contentious area as banks often contract out of their liability. 4. That maximum limits may be specified for fund transfers to limit their risks, 5. Advised to read the privacy policy statements prior to providing any personal information to any third party advertisers or hypertext web links, 6. Educating customers on their role in maintaining security of banking information by not sharing IDs and passwords with any one, by regularly changing their passwords and remembering to sign-off. 7. Notification of any variation in terms and conditions, 8. Advise on contractual arrangements for liability arising from unauthorized or fraudulent transactions, mode of notification, and information relating to lodgment of complaints. 9. A Client Charter on Internet Banking stating the institutions policies, products and services and commitment to offering quality service. UNITED KINGDOM 15

At present, there is an absence of any legal frame work laying down clear rules as to the apportionment of liability in the event of any disputed online transactions be it in the event of fraud or a systems failure or malfunction. In 1986, Banking Services: Law and Practice a Review Committee was set up which published its report in 1989. The Committee was particularly concerned with customer activated Electronic Fund Transfers (EFT) transactions. The Committee recommended the adoption of provisions similar to S.83 and S.84 Consumer Credit Act 1974 that a customer should be liable for losses incurred up to the point where the customer notifies the bank, subject to a financial limit. The bank would be liable for loss thereafter. Where gross negligence on the part of either party could be proved, then that party should be liable for the full amount of the loss. Three different approaches as taken by banks can be observed. First, terms similar to card transactions i.e. where banks assume liability from the

Banking Code, 2008(UK), Available online at http://www.bba.org.uk/content/1/c6/01/30/85/ banking_Code_2008.pdf , [accessed Jan 2011]

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point of notification but with certain limits imposed on the customer. Secondly, banks assume the entire risk until and unless it can be proved that the customer acted fraudulently or negligently and thirdly where a bank excludes all liability in case of fraudulent transactions until they are notified. This has been found to be the most common approach adopted by UK banks. Although banks are governed by a Banking Code each bank may set its own terms and conditions on the matter and the customer have no choice but to abide by them or change the bank. S. 2 of the new Banking Code 2008 (the Code) includes key commitments requiring banks to treat customers fairly. S.12 of the code gives customers the most up to date information on how to protect their accounts from fraud. S.12.13 Liability is outlined as :- Unless, you have acted fraudulently or without reasonable care (for example by not following the advice in section 12.9), you will not be liable for losses caused by someone else which take place through your online banking service. The burden is on the customer to take all reasonable precautions and show that all instructions given by the bank had been complied with. However there are still grey areas that need to be resolved. AUSTRALIA 16 The Electronic Funds Transfer Code of Conduct (Revised 2002) (the Code) operative since April 1st 2002, provides best practices for consumer protection in a technology neutral form for users of electronic banking and payment products. The Code is voluntary, but once adopted by a bank it becomes contractually binding upon the banks and financial institutions. The Code sets out detailed rules regarding allocation of liability in cases of losses from unauthorized transactions. It takes a tiered approach to allocation of liability. Clause 5.2 of the Code provides that the account holder will not be liable for losses that are caused by the fraudulent or negligent conduct of the employees or agents of the account institution; Relate to forged, faulty, expired or cancelled access methods;

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Review of Electronic Funds Transfer, Code of Conduct by the Australian Securities and Investment Commission (ASIC) 2007/08. Consultation Paper 90 released on 3 Oct. 2008. Available online at:http://www.asic.gov.au/asic/pdflib.nsf/Lookup ByFileName/CP-90-Review-of-Electronic-Funds-Transfer-Codev1.pdf/$file/CP-90-Review-of-Electronic-Funds-Transfer-Codev1.pdf , [accessed Jan 2009]

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Occur before the device or code has been received by the user, where a code or device is required for the user to use the access method; or Caused by the same transaction being incorrectly debited more than once to the same account

Clause 5.3 also provides that the account holder will not be liable for losses resulting from unauthorized transactions that occur after the account holder has notified the financial institution of the loss or theft of any security code or device forming part of the access method. Financial institutions have a duty to provide an effective and convenient method of notification. Clauses 5.5 and 5.6 set out circumstances where the account holder will be held responsible: Where the account institution can prove on a balance of probability that the users fraud or the breaching of certain security requirements by the user contributed to the loss. Where the account institution can prove on a balance of probability that the user contributed to the loss by unreasonably delaying the notification of the loss, theft, misuse etc. of the security code. Where a secret code is required to perform the transaction and neither of the first two circumstances applies, the account holder is liable up to a limit of $150/- of the losses. This thus provides a no fault approach within limits. In cases of systems failure Clause 6.1 of the Code provides that the account institutions will be liable to their users for loss caused by the failure of an institution system or equipment to complete the transaction accepted by the institution in accordance with the users instructions. Further, by Clause 6.2, an institution cannot deny its liability for a systems failure i.e. it cannot contract out. Again Clause 8.2 provides an institution cannot avoid its obligation by reason of the fact that they are party to a shared EFT system. This requires account institutions to secure back to back indemnity agreements. The EFT Code is currently under review by Australian Securities and Investment Commission (ASIC). There is currently a cause of action that allows people to recover payments made under a mistake of fact.

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The law on mistaken payments following decisions in David Securities v Commonwealth Bank of Australia and Australia 17 and New Zealand Banking Group Ltd v Westpac Banking Corporation 18 may be summarized as follows:

A mistaken payment is recoverable since the recipient is unjustly enriched In order to establish a prima facie right to recovery, the plaintiff must show that the payment was made because of a mistake It is then up to the defendant to establish reasons why the payment should not be returned.

Applying this law to the case of an electronic payment, a payment has been made under a mistake of fact to a person who would not have been paid but for the mistake. As a consequence, the payer has a prima facie right of recovery. USA 19

E-Banking and Consumer Protection The Electronic Fund Transfer Act (EFTA) is the major federal consumer protection law covering electronic banking transactions. It covers most electronic fund transfer (EFT) products and services associated with a consumer bank account, such as ATM and debit cards and computer banking. Under the provisions of Federal Reserve Board Regulation E (Electronic Fund Transfers), which implements the act, when you use an ATM card to withdraw money from or make deposits to your bank account, or use a debit card at a point-of-sale (POS) terminal to pay for a purchase with money from your bank account, you must receive a written receipt giving such information as the amount of the transfer, the date it was made, and the location of the terminal. This receipt is your record of transfers initiated at an electronic terminal. You can compare this receipt with your periodic bank account statement, which must show electronic fund transfers to and from your account, including those made with an ATM or debit card, by a pre authorized
(1992) 175 CLR 353 (1988) 164 CLR 662 19 U.S. Consumers and Electronic Banking, 19952003: A Report of Federal Reserve Government. Available online at http://www.federalreserve.gov/pubs/bulletin/2004/winter04_ca.pdf [accessed Dec 2009]
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debit, under a telephone transfer plan, or as a computer banking transaction. The statement must also identify the party to whom payment was made and show any EFT service fees. Consumer liability limits for unauthorized transfers involving ATM and debit cards linked to a bank account are different from the limits for the unauthorized use of credit cards. The federal limit for consumer liability on a lost or stolen credit card is $50. 20 Under Regulation, the limit for an unauthorized transfer by an ATM card, debit card, or other access device linked to a bank account can vary: Your loss is limited to $50 if you notify the financial institution that issued the card within two business days after learning of the loss or theft of your card or personal identification code. Your loss could be as high as $500 if you do not notify the financial institution within two business days after learning of the loss or theft of your card or code. If you do not report an unauthorized transfer that appears on your statement within sixty days after the statement is mailed to you, your liability for losses is the amount of any unauthorized transfers that take place between the end of the sixty-day period and the time you notify the financial institution. The financial institution must be able to show that the transfers would not have taken place if you had notified it within the sixty-day period. Your loss could include all the money in your account plus your maximum overdraft line of credit, if you have such a line of credit. Under the EFTA, if you notify your financial institution of an error involving an electronic fund transferincluding an unauthorized transferthe institution must promptly investigate and correct the error. If you believe there has been an error in an electronic fund transfer associated with your account,

1. Write or call your financial institution immediately if possible, but within sixty days of the date the institution mailed the first statement that you think shows an error. Give identity details, explain why you believe there is an error, describe the error, and state the dollar amount and date in question. If you call the financial institution, you may be asked to send the information in writing within ten business days.

See, For more information on liability limits on credit cards, Consumer Handbook to Credit Protection Law Available online at www.federalreserve.gov/pubs/consumerhdbk/

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2. The financial institution must promptly investigate an error and generally must resolve it within ten business days. If the institution cannot resolve the error within ten business days, it may take up to forty-five days to complete its investigation. In that case, within ten business days of your notifying the financial institution of the error, the institution must put back into your account the amount in question while it finishes the investigation. If the error involves a new account opened in the past thirty days, the financial institution generally must resolve the error within twenty business days. For a POS transaction, an international transaction, or a new account (if the error could not be resolved within the applicable period), the financial institution may take up to ninety days to complete its investigation. 3. The financial institution must notify you of the results of its investigation. If there was an error, the institution must correct it promptly, for example, by making there-credit final. If it finds no error, the financial institution must explain in writing why it believes no error occurred and let you know that it will deduct any amount re-credited during the investigation. Generally, electronic fund transfer products not associated with a consumer bank account, such as stored-value cards, are not covered by the EFTA. For this reason, you should read the documents you receive with a stored-value card to find out about protections as well as any fees for using the card. Some cards can be registered so that if the card is lost or stolen, a replacement can be issued.

COMPARISON OF E-BANKING IN INDIA WITH THAT OF OTHER COUNTRIES:From the above, the administrative as well as the legal regulatory framework with respect to EBanking in India as well as of the other developed countries like Australia, Malaysia, USA, and UK is quite clear. Thus after taking everything into consideration we can compare Indian position with that of other countries and we can also draw reasons that why India is not making up to the mark steps in Ebanking under the shadow of the following points. The first and the foremost reason for inefficient E-banking functioning is that the regulatory framework regarding E-banking in India is not refined and satisfactory as to the need of the society. The level of awareness among the people regarding functioning of E-banking is very low.

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Less people in India are following the proper security measures while dealing under the process of E-banking. The security measures regarding E-banking dealing is also not very proper. Lack of development, hosting and management of packaged software from a central facility regarding E-banking. And being a developing country, India is taking time to develop this new technology and making it popular among the masses.

What market factors, obstacles, problems and issues are affecting the growth of E-banking in developing countries? Human tellers and automated teller machines continue to be the banking channels of choice in developing countries. Only a small number of banks employ Internet banking. Among the middle- and high-income people in Asia questioned in a McKinsey survey 21, only 2.6% reported banking over the Internet in 2000. In India, Indonesia, and Thailand, the figure was as low as 1%; in Singapore and South Korea, it ranged from 5% to 6%. In general, Internet banking accounted for less than 0.1% of these customers banking transactions, as it did in 1999. The Internet is more commonly used for opening new accounts but the numbers are negligible as less than 0.3% of respondents used it for that purpose, except in China and the Philippines where the figures climbed to 0.7 and 1.0%, respectively. This slow uptake cannot be attributed to limited access to the Internet since 42% of respondents said they had access to computers and 7% said they had access to the Internet. The chief obstacle in Asia and throughout emerging markets is security. This is the main reason for not opening online banking or investment accounts. Apparently, there is also a preference for personal contact with banks. Access to high-quality products is also a concern. Most Asian banks are in the early stages of Internet banking services, and many of the services are very basic.

What are the trends and prospects for e-banking in these countries? There is a potential for increased uptake of e-banking in Asia. Respondents of the McKinsey survey gave the following indications:

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McKinsey survey, 2007. Mckinsey Quarterly., A survey regarding the position of E-banking in Asia.

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Lead users: 38% of respondents indicated their intention to open an online account in the near future. These lead users undertake one-third more transactions a month than do other users, and they tend to employ all banking channels more often.

Followers: An additional 20% showed an inclination to eventually open an online account, if their primary institution were to offer it and if there would be no additional bank charges.

Rejecters: 42% (compared to the aggregate figure of 58% for lead users and followers) indicated no interest in or an aversion to Internet banking. It is important to note that these respondents also preferred consolidation and simplicity, i.e., owning fewer banking products and dealing with fewer financial institutions. Less than 13% of the lead users and followers indicated some interest in conducting complex activities over the Internet, such as trading securities or applying for insurance, credit cards, and loans. About a third of lead users and followers showed an inclination to undertake only the basic banking functions, like ascertaining account balances and transferring money between accounts, over the Internet. 22

RECOMMENDATIONS AND CONCLUSION:-

E-Banking, the latest generation of electronic banking transactions, has opened up new window of opportunity to the existing banks and financial institutions. It permits business process reengineering, serving borderless market, to achieve zero latency leading to improvements in customer service levels and better risk management because of real-time settlement. Since its evolution in preceding decade, it is having unprecedented growth. The growth rate is higher in developed Countries, and comparatively lower in LDCs countries. The E-Banking sector is highly prohibitive for the new entrants although the inception cost is lower with high growth rate. The brand preference of the customer, existing network, physical existence, security and safety, supplier bargaining power, substitute product of non-banking sectors have made the way thorny. However, new comer with innovative idea and strategy definitely can make position in this sector. The analysis of the evolution and present status of E-Banking make some room to

22

McKinsey survey, 2007. Mckinsey quarterly, A survey regarding the position of E-banking in Asia.

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analyze the problem for the government, new entrants and existing e-banks for effective utilization of the opportunity to accelerate the economic growth.

Recommendations regarding Legal Position of E-banking in India In India, there are very few legal provisions ensuring fair dealing of E-banking in India. The very few provisions dealing with E-banking are not very specific. Thus we are in a dare need of enactment of the new well defined and well developed legal provisions in Indian Statutes which can ensure not only the proper functioning of Ebanking in India but the security of the transactions in E-banking in the Country. Other Recommendations regarding E-banking 23:Internet penetration is a major factor for the growth of E-Banking. A research by OECD indicated that there is a strong positive correlation between Internet usage and E-Banking usage. The trend is usually logarithmic and is the take-off phase for Internet banking which needs at least 30% Internet usage among the population. 24 However, Internet penetration alone does not guarantee online banking penetration. In this situation, like Mexico, companies can give incentives, subsidizing the surfing cost, free training, multiple access facility (web, telephone, ATM etc.), motivation programs to the user and the population as a whole. So, the Indian Banking scenario has to take the internet penetration by subsidizing the whole process for better perforation of the technology for faster and reliable E-banking services. Standard and Mature technology is always a problem in this Hi-tech age. In Finland, for example, there are multiple technological standards for some E-Banking services that complicate fast spreading of these innovations 25. Setting up electronic banking requires substantial investments and it is very complicated to move from old technologies to new ones. Thus, Indian banks can cooperate closely in the field of developing standards to offer services to third parties.
Kar,S.K., Electronic Banking and Payment System, Reading Material, Prepared by, Member of Faculty, RBSC Christiansen, H., 2001. Electronic Finance: Economics and Institutional Factors. OECD Financial Affair Division Occasional Paper No. 2, 25 Kerem K., O. Lutik, M. Srg, V. Vensel, 2002. E-Banking In Estonia: Development, Driving Factors and Effects. Vienna: 10th Annual Conference on Marketing and Business Strategies for Central & Eastern Europe,. Unpublished
24 23

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E-Banks must take aggressive marketing effort. It has been seen that the marketing efforts made to promote Estonian Internet banking have been continuous and aggressive in different media channels and in bank branches. 26 Indian Banking sector have to make a comprehensive research for finding innovative products, which would then promoted extensively, have a higher chance of success in the market than similar products without the communications support. All of the efforts to establish an internet only model E-Banking of business has not been succeed yet. Thus there must be a physical existence of the bank and E-Banking could be an extent to that operation. It will give the customers an impression of security and safety. Using State-of -Art technology enables the organizations to avoid problems of legacy systems and any inefficiency. For example, rapid adoption of new technologies has helped the Estonian banks to leapfrog some of the traps that have slowed down the process of development in countries with better starting position. E-Banks must try to expand their network as soon as possible. Most of the customers use E-Banking facility to pay bills, shopping etc. As more and more third parties are involved in the network, we need to have strong legislation for the E-banking to prevent loss to the customers. Governments main role is enhancing the enabling environment, as it is known that the direct intervention into financial markets may have poor results. In general, the Estonian government has taken a laissez faire approach to the regulation and supervision of the economic policy 27. Indian government should use ICT to generate positive publicity, which would foster positive attitudes nationwide. Last but not least, the e-banks must try to achieve critical mass. Achieving critical mass is key success factor in electronic banking development. This can be achieved when there is substantial Internet penetration and banks are able to provide services, which have very broad demand.

26

Avlonitis, G. J, Papastathopoulou, P, 2000. Marketing communications and product performance: innovative vs. non-innovative new retail financial products millennium . International Journal of Bank Marketing, 18/1 pp 27-41 27 Kalkun, Mari and Tarmo Kalvet, 2002 eds. Digital Divide In Estonia and How to Bridge It, Tallinn: Emor and PRAXIS Centre for Policy Studies,

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REFERENCES: Andrea Schaechter, 2002. Issues in E-banking: An Overview. Washington D.C. IMF Policy Discussion Paper Adoption and Use of Internet Banking in Zimbabwe: An Exploratory Study, Journal of Internet Banking and Commerce, April 2009, vol. 14, no.1. Barczak G.E, Scholder P. & Piling B.K.T.,1997. Developing typologies of consumer motivation for use of technologically based banking services, Journal of Business Research 38 (2), 131-40. Black N.J. Lockett A., Ennew C. & Winklhofer H., 2001. Adoption of Internet banking, a qualitative study. International, Journal of Retail & Distribution Management 29 (8), 390-8. Gupta S.N., 1999. The Banking Law in Theory & Practice.,Universal Law publication Co. Pvt. Ltd. . Vol.1 Third ed. Information Technology in Malaysia, August 2008. E-service quality and Uptake of Internet banking. Journal of Internet Banking and Commerce. Vol. 13, no.2 Kamath, Nandan, 2005. Law relating to Computers, Internet & E-Commerce. Delhi: Universal Law publication Co. Pvt. Ltd. Md. Abdul Hannan, Mia Mohammad Anisur Rahman, Md. Main Uddin, 2007. E-Banking: Evolution, Status and Prospects, The Cost and Management.Vol. 35 No. pp. 36-48 Mukherjee T.K., 1999.Banking Law and practice.Allahabad: Premier Publishing Company, Vol.1 McKinsey survey, 2007. Mckinsey Quarterly., A survey regarding the position of E-banking in Asia. Paul Anning and others, 2003. E-Finance Law and Regulation. U.K.: Lexis Nexis RBI Guidelines on E-Banking. Internet Banking in India Guidelines DBOD.COMP.BC.No. 130 / 07.03.23/ 2000-01 June 14, 2001 United Nations, 2002. E-commerce and development report, New York and Geneva. Uppal, R.K. & Jatana, Rimpi, 2007. E-banking in India - Challenges and Opportunities. New Delhi: Eastern Book House. Wright Benjamin and Winn K. Jane, 2006. The Law of Electronic Commerce. Third edition, UNIVERSAL RESOURCE LOCATOR http://www.arraydev.com/commerce/JIBC/articles.html http://www.asia.internet.com/asia-news/print/0,,161_648221,00.html. http://www.bankinfo.com http://www.banknetindia.com/banking/ ibkg.html

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