Incorporation of Information Technology Act in  Banking Transactions

Dr. Ashok  Pawar; Dr. Sunita J. Rathod (Pawar); Dr. Manish Pawar; Niraj J. Rathod

Volume : III, Issue : IX, September - 2013

Incorporation of Information Technology Act in Banking Transactions

Dr. Ashok Pawar, Dr. Sunita J. Rathod Pawar , Dr. Manish Pawar, Niraj J. Rathod

Abstract :

The banking sector in India underwent an unprecedented transformation in the 1990s with the emergence of a large number of private as well as foreign multinational banks. As a result of the economic reforms, the number of banks increased rapidly. With the emergence of a large number of banks in the Indian economic set up, banking activities increased manifold and affected a large number of areas of operation of banks, particularly in the field of bank lending. Banks used to and still operate on the pattern of extending credit on the basis of security given by its customers associated with the bank. The facility of extending credit is recognition of the changing times in which banks have to operate in a changing and ever evolving economic scenario. Growing needs coupled with the realization of higher rate of investments is a compulsion giving birth to bank credit. The Indian Information Technology Act, 2000, basically a framework law, makes hacking a punishable offence under Section 66. Breach of information security is implicitly recognized as a penal offence in the form hacking. The appropriate government (central/state) is empowered to declare any computerized, account computer systematic or a computer network as a protected system. A ten year prison term and a hefty fine await any person who secures access to the secured computer systematic in contravention of the provisions of the law. Despite the deterrence characterized by the penal provisions of the IT Act, 2000, a lacuna in the law is that organizations and entities can take action against those who each data security procedure, but they are not obliged to implement data security measures to protect consumers and clients. The IT Act does not lay down any such duty upon banks. Contrastingly, in UK, failure to undertake identification of new customers properly can create an array of risks for the bank. Under the Data Protection Act, 1998 an earring bank may face an action for damages if it fails to maintain adequate security precautions in respect of the data. Essentially, a legal duty is thrust upon the banks, to use reasonable care and skill in disseminating information to persons who access the banking networks either on the internet or though an ATM card.