Banking in India has undergone a dramatic change with the introduction of technology. Internet Banking has today become a standard feature of every Bank account. Mobile Banking is also being progressively introduced.

While introduction of technology is welcome, one needs to also consider if the introduction of technology has raised concerns on the preservation of basic aspects of Banking. While technology introduction has been often justified on cost considerations, customers of Indian Banks have only seen an increase in transaction costs. Partly this is because of the increased commercialization of Bank operations where the objective of Banking has been to make profits and more profits.

 In this mad pursuit of profits Banks have not even spared an erosion of security of their operations and introducing technology without considering the adverse effect on safety of operations from the customer perspective.

In a mis interpretation of law, many Banks have been tweaking their customer contracts to state to the effect that “Banks are not responsible for any frauds that may affect your account. Customer is responsible even if money is withdrawn fraudulently from his account. We will only provide such security as is considered commercially desirable”. After introducing such clauses, Banks feel that they are secured from any liability arising out of frauds. They are also signing off their financial statements without making adequate provision for fraud related losses.

Unfortunately, this is a false sense of “All is Well” attitude is slowly accumulating risks in Banking operations which may explode one day into a scam that may sweep away a few Banks.

Law in India is not so weak as to ignore the interest of customers and absolving the Banks of their liability on frauds. In particular ITA 2008 has made it mandatory for Banks to ensure that the banking operations are secure. If Banks donot introduce what may be considered as resonable security practices, they would be held liable both for civil liabilities as well as criminal liabilities.

“Due Diligence” is therefore the buz word in Banking and the Mantra for the Directors and Chairman if they need to avoid liabilities under ITA 2008.

In order to provide an insight into what ITA 2008 expects of Bankers in the form of “Due Diligence”, Cyber Law College has organized a one day workshop at Bangalore on October 25. Those Bankers who want to understand the implications of ITA 2008 should not miss this opportunity to interact with experts and explore ITA 2008. Those who want to attend the workshop, may contact naavi@vsnl.com immediately.

Be Aware, Be Secure.

Naavi of naavi.org

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