Indian Banking industry is already reeling under the  increasing Cyber Crime risks. The recent US $ 200 million Credit card fraud exposed in USA and a series of Bank frauds in RTGS and NEFT systems have exposed that the Banking system in India is lacking the fundamental ingredient of “Safety”. The much hyped “OTP” system has failed. The legal system which endorses the use of “Digital Signatures” is being ignored by rogue Banks and RBI has not been able to bring such Banks to the right tracks.

The Judiciary had an option to bring Banks to track and the adjudication verdict in the case of S.Umashankar Vs ICICI Bank in Chennai had paved the way for reforms in E Banking security through judicial intervention. However, the erring Banks conspired with the regulators in the Government of India and removed the functionality of the Cyber Appellate Tribunal which was a key judicial authority for examining the E Banking related frauds through the eye of ITA 2000/8. Additionally some Banks conspired to hit at the adjudication system itself and with obliging IT Secretaries such as the one in Karnataka shut off the adjudication option for E Banking victims. Similarly they have ensured that the ombudsman of RBI does not come to the assistance of E Banking victims by getting some key provisions of the Bankign Ombudsman scheme amended.

RBI has not been able to make intended changes though they did put in efforts through the G Gopalakrishna Working Group report (GGWG Report on E Banking Security) and  Damodaran Committee report on Customer Service. However, rogue Banks who want to propfiteer from technology even at the expense of security of banking have through the institution of Indian Banks Association challenged the RBI and prevented it from notifying Damodaran Committee recommendations and going slow on the implementation of GGWG recommendations.

In this background the Reserve Bank of India has now released a discussion paper on a plan to disincentivise usage of cheques. Public have been asked to send their comments before February 28, 2012.

Disincentivisation of cheques automatically means greater push to the elecronic banking along with the attendant risks.

It is my observation that the risks in Electronic Banking in India have not so far been adequately addressed by Banks I therefore feel that the time is not ripe to push Indian Bank customers towards a forced adoption of E Banking. This may lead to higher risks in Banking and the responsibility for further endangering the Indian Banking system will be on RBI.

Public comments for the discussion paper are to be submitted before February 28, 2013.

I will be submitting my views through Naavi.org.

I urge public to also submit their response on whether the use of cheques need to be disincentivised by positive action or be left to market forces.

Copy of the discussion paper is available here

Comments may be emailed here: chequeusage@rbi.org.in

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