The Bombay high court on Thursday directed the Reserve Bank of India (RBI) to respond to a public interest litigation raising concern over the legality and security of e-wallets purportedly being operated by non-banking entities.
The division bench of chief justice Manjula Chellur and justice Girish Kulkarni said the petitioner, KS Pillai, raised an important issue and that the court wanted to know how the RBI has been regulating e-wallets. The bench added the ministry of finance as party respondent to the petition and issued a notice to the Union ministry.
Claiming that the RBI is currently not in a position to control digital money, Pillai said it 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.
Pillai — who approached the high court in December 2016 when there were huge queues outside ATMs — stated 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.
Pillai added 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.