Implications of Information Technology in Banking-Cyber Law and Cyber Security in India

My paper highlights the pros and cons of technology based banking services in India. Banks mobilize public savings and facilitate investments. The liberalization of banking services by the government and the Reserve Bank of India has accelerated the growth of the banking sector in an effort to promote economic growth and prosperity. Since 1990, banks have started to invest more in technology in order to convert the branch based banking system into a customer oriented banking system.

The revolution of information technology in banking has redefined banking strategies and approaches. The effective use of information technology by credit institutions can help them  provide banking services at higher quality by facilitating the adoption of transparent systems, the reduction of costs and the provision of high speed services to bank’s customers. Advertising, online banking and customer care services have become a recent trend. Banks have adopted internet based communication systems, allowing the online transfer of funds and electronic commerce systems that facilitate online client interactions. Telecommunication technologies and the computerization of administrative services allow online trading of shares and mutual funds. Credit and debit card payment systems can be used to book road, rail and air tickets, pay various service utility bills and shop online.

The Information Technology (IT) Act 2000 as amended in 2008 regulates electronic business transactions and cyber crimes. The Act excludes from its scope negotiable instruments, powers of attorney, trusts, wills and other testamentary dispositions, contracts for the sale of immovable property and other transactions notified by the central government. Legal recognition is given to all electronic records through electronic signatures authenticated by the controller of Certifying Authorities after verification of the origin, destination, date and time of transition, following an audit of these matters. Chapter XI of the Act defines various types of offences by prescribing the penalty based on the severity of the offence committed.

The IT Act has amended Section 354 D and Section 446 of the Indian Penal Code and Section 67A & Section 73-A of the Indian Evidence Act, 1872. The IT Act has included all electro-magnetic data storage devices in the Bankers Books Evidence Act, 1891, so that all electronic data stored in such devices can be submitted as evidence to a court of law. It has also empowered the Central Board, that has been constituted by the Reserve Bank of India, to regulate fund transfers via electronic means provided by banks or other financial institutions, based on The Reserve Bank of India Act, 1934.

The provision of internet based services by banks triggers security concerns due to instances of frauds and cyber attacks, such as web spoofing, attacks on bank’s servers and network tap. These acts need to be treated by the use of constructive technology defensive mechanisms, such as the imposition of authorization requirements, the adoption of mandatory policies for the protection of confidential information, and the establishment of processes that protect customers against duplication of debit and credit cards. Banks have also adopted total security mechanisms, such as firewalls, data encryption devices, digital certification devices, biometric techniques, and unique and safe passwords.

My paper analyses the cyber crimes that were reported in 2012-2013. In India a total of 2876 cyber cases were registered in 2012 and 4356 in 2013, showing a 94.4 per cent annual increase in total recorded cyber crime. Among all states and union territories, the State of Maharashtra registered the most cyber crimes (681 cases), with an annual increase in crime rate of 44.6 per cent from the 471 cases registered in 2012. Even though the State of Maharashtra, Andra Pradesh and Karnataka produce 70 per cent of the revenue of the whole IT industry for the country, they were the top three in terms of number of recorded cyber crimes in 2013.

My paper also discusses the cyber crime cases registered and the total arrests that occurred in India between 2010 and 2013. It is reported that there was a rise in crimes of 51.8 per cent in 2012-13. 426 persons were arrested for IT crimes in Maharashtra and 319 persons were arrested for crimes provided by the Indian Penal Code in Uttar Pradesh in 2013. Out of the total 4,356 cases registered and the 2098 arrests that occurred under the IT Act in 2013, 1966 cases were reported and 818 arrests took place for criminal damage of computer resources, 550 cases and 193 arrests for hacking, 137 cases and 59 arrests for tampering with computer documents, 93 cases and 30 arrests for breach of confidentiality, and 71 cases and 51 arrests for fraudulent digital certificates. Out of the 1,337 cases registered and the 1,203 arrests made under the Indian Penal Code in 2013, 747 cases were reported and 626 arrests took place for forgery, 518 cases and 471 arrests for criminal breach of trust, 59 cases and 93 arrests for counterfeiting. My paper reveals that the majority of people arrested for cyber crimes in 2013 were between 18-30 years of age. The economic growth and national security depends on the secured and protected cyber space of the country. The education of people about the perils of cyber crimes is the need of the day. My paper examines banking services offered via IT devices in order to highlight the possible threats emanating from cyber crimes, along with the legal safeguards needed to boost customer satisfaction through innovations.

The adoption of regulations facilitating the liberalization of banking services and the development of new IT technologies have led to the electronic transformation of the traditional provision of banking services. India has the second largest number of Internet users with 302 million users. Nevertheless, the IT revolution in banking has also led to the increase of cyber crimes in India. Some customers become victims of fraud and disclose their personal information to fraudsters, while hackers use malware to circumvent local security systems of banks and transmit illegal data in online banking platforms. Hence, there is a need to protect the Indian cyber space. Even though most customers are satisfied with the provision of electronic banking services, they should also become aware of the risks associated with recent technology in order to protect themselves from cyber crimes.

Pradeep M.D. is an Assistant Professor at  Srinivas Institute of Management Studies Mangaluru, Karnataka, India.