The Reserve Bank of India had set up a Working Group on Internet Banking to examine different aspects of Internet Banking. The Group had focused on three major areas of I-banking, i.e, (i) technology and security issues, (ii) legal issues and (iii) regulatory and supervisory issues. Accordingly, the guidelines were issued by RBI on June 14, 2001 for implementation by banks. As per original internet banking guidelines, all banks intending to offer transactional services on the Internet were required to obtain prior approval from RBI. However later on July 20 2005, this restriction was removed thus no prior approval of the Reserve Bank of India is required for offering Internet Banking services. The banks intending to offer the internet banking should have Bank’s Board approved Internet Banking policy to ensure the compliance of RBI guidelines.
Internet Banking Guidelines
Some of the internet banking guidelines are:
- The bank should also submit a security policy covering recommendations of RBI and a certificate from an independent auditor that the minimum requirements prescribed have been met.
- Banks will report to RBI every breach or failure of security systems and procedure
- The guidelines issued by RBI on Risks and Controls in Computers and Telecommunications should be adhered to.
- Only institutions who are members of the cheque clearing system in the country were permitted to participate in Inter-bank payment gateways for Internet payment. Each gateway must nominate a bank as the clearing bank to settle all transactions. Payments effected using credit cards, payments arising out of cross border e-commerce transactions and all intra-bank payments (i.e., transactions involving only one bank) were excluded for settlement through an inter-bank payment gateway
- All settlement should be intra-day and as far as possible, in real time. However Inter-bank payment gateways must have capabilities for both net and gross settlement
- SSL / 128 bit encryption must be used as minimum level of security.
- Banks must make mandatory disclosures of risks, responsibilities and liabilities of the customers in doing business through Internet
- Banks must ensure that KYC guidelines are followed
- Banks are permitted to offer Internet based foreign exchange services, for permitted underlying transactions, in addition to the local currency products. Internet based platform for dealing in foreign exchange, should allow only reporting and initiation of foreign exchange related transactions, with the actual trade transactions being permitted only after verification of physical documents. Banks should comply with FEMA regulations in respect of instructions involving cross-border transactions
- banks are permitted internet based operations on Rupee Vostro Accounts maintained by exchange houses or banks outside India with them, provided the banks in India ensure that the software will prevent any unauthorised operation
- Banking Ombudsman Scheme 2006 included deficiencies arising out of internet banking. A customer may lodge a complaint against the bank for its non-adherence to the provisions of the fair practices code for lenders or the Code of Bank’s Commitment to Customers issued by the Banking Codes and Standards Board of India (BCSBI)
- All licensed StCBs, DCCBs, UCBs and RRBs which have implemented Core Banking Solution (CBS) and migrated to Internet Protocol Version 6 (IPv6) can offer Internet Banking (View only) facility to their customers, without prior approval of RBI. The cooperative banks offering Internet Banking (View only) facility to their customers should ensure that the facility is strictly for non-transactional services such as balance enquiry, balance viewing, account statement download, request for supply of cheque books, etc. and no online fund-based transactions are allowed.
- All licensed StCBs, DCCBs and UCBs which have implemented CBS and have also migrated to Internet Protocol Version 6 (IPv6) and fulfilling the following criteria may offer Internet Banking with transactional facility to their customers with prior approval of RBI:
- CRAR of not less than 10 per cent.
- Networth is Rs.50 crore or more as on March 31 of the immediate preceding financial year.
- Gross NPAs less than 7 % and Net NPAs not more than 3%
- The bank should have made a net profit in the immediate preceding financial year and overall, should have made net profit at least in three out of the preceding four financial years.
- It should not have defaulted in maintenance of CRR/SLR during the immediate preceding financial year.
- It has sound internal control system with at least two professional directors on the Board.
- The bank has a track record of regulatory compliance and no monetary penalty has been imposed on the bank for violation of RBI directives/guidelines during the two financial years, preceding the year in which the application is made.
- All RRBs which have implemented CBS and have also migrated to Internet Protocol Version 6 (IPv6) and fulfilling the following criteria may offer Internet Banking with transactional facility to their customers with prior approval of RBI:
- CRAR of not less than 10 per cent.
- Networth is Rs.100 crore or more as on March 31 of the immediate preceding financial year.
- Gross NPAs less than 7 % and Net NPAs not more than 3%
- The bank should have made a net profit in the immediate preceding financial year and overall, should have made net profit at least in three out of the preceding four financial years.
- It should not have defaulted in maintenance of CRR/SLR during the immediate preceding financial year
- The bank has a track record of regulatory compliance and no monetary penalty has been imposed on the bank for violation of RBI directives/guidelines during the two financial years, preceding the year in which the application is made.
- It has sound internal control system which should be approved by a CISA qualified independent auditor.
- The bank should not have accumulated losses
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Tags: Internet Banking Guidelines, Internet Banking Guidelines in India