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Whatever way e-commerce develops, it will definitely need the support of a financial
system that is fast, reliable, and secure. Electronic banking and electronic money are
revolutionizing the way our financial system functions. Some of the issues seen with
respect to e-money are
Legal validity
The issuance of paper currency and coins in India is legally governed by the Constitution
of India and some Central statutes. The Constitution gives the Central Government the
sole authority to coin money that serves as legal tender. The Reserve Bank of India has
the sole right to issue currency notes. When e-money products allow multiple transfers
among individuals without requiring the direct involvement of a third party, in a manner
similar to a person-to-person exchange of currency, it is likely that e-money could act as
a substitute to cash. However, e-money would not constitute a valid legal tender as it is
not a medium of exchange authorized or adopted by the government. At best, e-money
is a promise by the issuer to pay the e-money holder an equivalent amount in valid legal
tender.
Rather than simply clarifying whether under the existing laws private issuers can issue E-
money, the RBI should also address the issue of whether the private sector should be
allowed to issue e-money. If the RBI decides to permit private issuance, it will have to
develop rules and regulations affecting the issue and conduct of e-money business in
India.
