IFSCA directions for providing Internet banking services to clients of IBUs

International Financial Services Centres Authority (IFSCA) has taken a significant stride towards enhancing banking services within International Financial Services Centres (IFSCs). With its recent circular dated April 22, 2024, IFSCA has underscored the imperative for IFSC Banking Units (IBUs) to offer robust internet banking services to their clients.

Understanding the Mandate
The circular delineates the scope and expectations regarding internet banking services to be extended by IBUs. Internet banking services encompass a spectrum of functionalities ranging from information dissemination to transaction execution, all facilitated through electronic delivery channels over computer networks or internet technologies.

Three Pillars of Internet Banking Services
IBUs are mandated to provide three core internet banking services:

  1. Information Service: IBUs must furnish comprehensive information on their products and services, ensuring transparency and clarity regarding offerings, including interest rates, terms, and conditions. Regular updates are imperative to keep clients informed about the latest developments.
  2. Interactive Information Exchange Service: Facilitating two-way communication, IBUs are required to empower clients to interact, make inquiries, and submit applications for additional services or products. This fosters engagement and responsiveness to client needs.
  3. Transactional Service: Enabling clients to conduct financial transactions seamlessly, IBUs must offer transactional services encompassing fund transfers, bill payments, and other financial transactions, ensuring efficiency and security in every transaction.

Upholding Security and Compliance
IFSCA underscores the paramount importance of robust risk management and security measures in the provision of internet banking services. IBUs are mandated to adhere to stringent guidelines to safeguard client interests and data integrity:

Policy Framework: IBUs must establish a comprehensive policy for internet banking services, aligning with their parent bank’s overarching IT and information security policy. Emphasis is placed on confidentiality, compliance, and risk mitigation.

Compliance and Legal Framework: IBUs are obligated to comply with KYC requirements and adhere to technology, security, and legal standards. Sound internal control systems are imperative to mitigate operational risks.

Customer Disclosure: Transparent disclosure of risks, responsibilities, and liabilities is mandated to empower clients with informed decision-making. IBUs are urged to benchmark their services against global standards to ensure a superior customer experience.
Implementation Roadmap

IBUs are tasked with submitting an implementation plan within 45 days, outlining their proposed internet banking services and timelines. The clock is set for six months from the circular’s issuance for IBUs to establish internet banking services. Delays may invite regulatory repercussions, emphasizing the urgency of swift implementation.