Legality of E-Wallets: Bombay HC directs RBI to Respond to Concerns

Recently, the Bombay High Court, while hearing a PIL challenging the legality of e-wallets, asked the Reserve Bank of India to respond to the concerns relating to the issue.

The petitioner, KS Pillai, raised issues regarding legality and security of e-wallets purportedly being operated by non-banking entities.

The division bench comprising Chief Justice Manjula Chellur and Justice G.S Kulkarni said that the issue raised in the petition is an important one the Court wanted to know the steps taken by the RBI for regulating e-wallets.. The bench, further, added the ministry of finance as party respondent to the petition and issued a notice to the Union ministry.

The petition states that, the RBI, being not able to control digital money, permitted several non-banking entities to issue e-wallets, which was not permissible under banking laws.He alleged that a few entities had been operating e-wallets and smart cards without authorisation from the RBI.

He said non-banking entities accept deposits in their electronic domains for payments under different brand names. According to him, as this is a banking activity, it falls under banking regulation laws, but as there is no regulation over such operators, the money is deposited in e-wallets are in unauthorised hands.

The petitioner approached the High Court earlier in December stating that he was apprehensive that if private entities were not prevented from operating utilities like e-wallets and smart cards, it would put the safety of customers at risk. It further states that e-wallets could be a good alternative to cash requirements and thus sought a direction to all nationalised and scheduled banks to implement e-wallet schemes under the RBI’s supervision.

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