Monthly Archives: February 2014

Reserve Bank Of India (RBI) Trying To Streamline Mobile Banking Services In India

Reserve Bank Of India (RBI) Trying To Streamline Mobile Banking Services In IndiaThe online payment market of India is fast growing. Foreign investors have started investing in this remunerative field and we are seeing lot of investment opportunities in this field. Of course, most of online payment service providers are not complying with Indian laws and their projects and ventures are vulnerable to legal actions.

Even foreign investors in online payment industry of India are not conducting cyber law due diligences (PDF) while investing in Indian e-commerce and technology ventures. These investors are also not checking whether legal issues of e-commerce in India have been duly complied with or not by those dealing in e-commerce related activities.

Even foreign players are trying to enter into this field. For instance, Apple plans to launch mobile payment service through Touch ID. In order to ensure that Apple remains on the legal side, recently Apple removed Bitcoin application Blockchain from its application store. This is because virtual currencies like Bitcoins are full of legal and security risks. Most of the Bitcoins exchanges are not complying with Indian laws and they are vulnerable to legal actions of various sorts.

Efforts are in the process to spread the reach of mobile banking in India. For instance, RBI is exploring use of encrypted SMS based fund transfers in India. However, the encryption laws in India are not clear as on date. Similarly, mobile payment legal compliances are still not followed in India. Cloud computing legal risks are looming large upon cloud service providers and if mobile payment service providers would use cloud based services; this would raise additional techno legal issues.

Now it has been reported that a technical committee appointed by the RBI has recommended standardisation and simplification of procedures for registration / authentication of customers for mobile banking services. It has also suggested adoption of a common application platform (with necessary level of security through encryption) across all banks and putting in place a cohesive awareness programme.

The committee has identified the challenges faced by the banks in providing mobile banking to customers in general (customer enrolment and technical issues) and further highlighted the challenges faced in providing SMS / unstructured supplementary service data (USSD) / application-based mobile banking and recommended solutions for the same.

Considering the fact that non-PKI enabled payment systems, such as clearing (MICR / non-MICR), electronic credit system, credit card and debit cards contributed 75 per cent in volume terms but only 6.3 per cent in value terms in the year 2012-13, the group has suggested that in order to ensure a safe, secure payment system in the country and to ensure legal compliance, digital technology, such as, PKI may be used.

The report also highlights, among other things, security features in existing payment system applications and feasibility in implementing PKI in all payments system applications. The group has also recommended that banks may carry out in phases PKI implementation for authentication and transaction verification.

Perry4Law welcomes this move of RBI and at the same time would like to stress that these initiatives of RBI would not be fruitful till a techno legal compliance framework is prescribed by RBI and is actually implemented all across India.

Related Reports And Press Releases Of RBI

RBI Releases Report Of The Technical Committee On Mobile Banking (PDF)

RBI Releases Report On Enabling PKI In Payment System Applications (PDF)

Report Of Technical Committee Of RBI On Mobile Banking (PDF)

Report Of The RBI Working Group On Enabling PKI In Payment System Applications (PDF)

Is Google Liable To Pay Taxes In India?

Is Google Liable To Pay Taxes In IndiaGoogle is all set to challenge the Indian laws and various provisions under them that are making it answerable to Indian courts and liable under various legal frameworks. The online defamation case of Google is already pending before the Supreme Court of India. Similarly, various cases filed against Google under the Information Technology Act, 2000 (IT Act 2000) are also pending in various Courts.

Google has a single defence against all these alleged civil and criminal violations. It has been maintaining that all the accusations and liability can be imputed to the parent company that is situated in United States (US.). Since Google’s parent company is subjected to U.S. laws, it is neither amendable nor answerable to various Indian laws and their compliances.

This stand is occasionally taken before various Courts in India whether it is a civil or criminal case. Google’s subsidiary argument is too week to stand any trial yet Google has been winning from time to time. Google is also winning despite the fact that there are clear cut violations of Indian laws like IT Act, 2000. Google is an Internet intermediary within the meaning of IT Act, 2000 and it is also required to comply with cyber law due diligence requirements (PDF) for having strong virtual and physical contacts in India. Even advertisement revenue is also earned by Google from Indian activities.

In these circumstances claiming that Google is not liable under Indian laws is not legally tenable. It is high time for Indian courts to remove the façade of subsidiary and make the parent company liable under Indian laws. Websites like Facebook and Google are liable to pay taxes under Indian laws as they generate huge revenue through agreements with Indian advertisers as well as sale of games and applications to internet users here.

Google India has contended in its affidavit that it “is not providing any taxable services in India, neither has a permanent establishment in India nor is it earning any income which is arising from or accruing in or deemed to be arising or accruing from India. “Furthermore, Google is not receiving any payment in the nature of ‘royalty’ which may be taxable either under the relevant Indian laws or under the Double taxation Avoidance Agreement between India and USA.”

We at Perry4Law believe that all Subsidiary/Joint Ventures Companies in India, especially those dealing in Information Technology and Online Environment, must mandatorily establish a server in India. Otherwise, such Companies and their Websites should not be allowed to operate in India. The Ministry of Home Affairs, India and Intelligence Bureau (IB) are already exploring this possibility.

A “Stringent Liability” for Indian Subsidiaries dealing in Information Technology and Online Environment must be established by Laws of India. More stringent online advertisement and e-commerce provisions must be formulated for Indian Subsidiary Companies and their Websites.