India may extend an August 31 deadline in its standoff with Research In Motion over access to Blackberry data, if the Canadian firm says it has a solution and asks for time, a government source said on Friday.

India says it wants the means to track and read Blackberry's secure email and instant messaging services that officials fear could be misused by militants and anyone trying to create political instability.

RIM says it was willing to lead an industry forum to look at India's security concerns as well as uphold the need of corporates for a secure system.

If they say we have a solution and ask for time, then we'll see, the Indian government source, who declined to be named because of the sensitivity of the matter, said. Everything is possible.

Executives of the Canadian firm met government officials for last-ditch negotiations aimed at finding a solution. The government has said it will take a final decision on Monday.

BlackBerry's troubles in India, which could cut it out from one of the world's fastest growing mobile phone markets, are the latest in the firm's global headaches as governments worry its encrypted services could be used for activities from terrorism to peddling pornography.

Governments such as Saudi Arabia's fear it could become a tool to plan militant attacks or for those breaking Islamic laws.

RIM uses powerful codes to scramble, or encrypt, email messages as they travel between a BlackBerry device and a computer known as a BlackBerry Enterprise Server (BES) that is designed to secure those emails.

RIM has said BlackBerry security is based on a system where the customers create their own key and the company neither has a master key nor any back door to allow RIM or any third party to gain access to crucial corporate data.

India is one of a number of countries putting pressure on RIM, which has built the reputation of the BlackBerry, popular with business professionals and politicians, around confidentiality.

We will only accept a solution which will enable us lawful interception of BlackBerry services in the interest of national security, an Indian government official close to the negotiations with RIM told Reuters.

The solution, if they come up with it, will have to go through field trials and satisfy our technical experts, he said. The government's position does not change ... We are hopeful they will come up with some solution.

RIM said singling out BlackBerry for blocking would be counter-productive for India, as it would limit the efficiency and productivity of local firms.

A shutdown would affect about 1 million users in India out of a total 41 million BlackBerry users worldwide, allowing them to use the devices only for calls and Internet browsing.

I think these concerns have been addressed in other parts of the world. I see no reason why the Indian government and its agencies should take any risk at all as far as technology is concerned, junior telecoms minister Sachin Pilot said on Friday.

(Editing by Surojit Gupta and Sanjeev Miglani)

India Blackberry Security