RBI Enhances the Security of Credit and Debt Cards

My current credit card expired recently and I was issued a fresh card by the bank. An interesting thing about the new card was the it permitted contactless transactions. Call me paranoid but I was not very comfortable with the contactless feature. I asked the bank to switch off the feature but the bank declined. The bank said they couldn’t do it and went into the usual rant about how I could approach them if a fraudulent transaction were to take place. I left it at that, disappointed though.

Now, the banks can’t deny such requests. The Reserve Bank of India has issued a circular “Enhancing Security of Card Transactions” on January 15, 2020. The circular applies to both credit cards and debit cards. The circular comes into force on March 16, 2020. The provisions of the circular do not apply to prepaid cards.

Here are the key highlights of the circular.

#1 At the time of issue/re-issue, the credit or debit card shall only be enabled for use at contact based points of usage (ATMs and Point of Sale devices) within India. This means that your card won’t be enabled for online transactions, international transactions or contactless transactions by default. You must explicitly request your bank to permit such transactions.

#2 Based on risk perception, the banks can decide to disable your card for online transactions (both domestic and international), physical/offline transactions (international) and contactless transactions.

#3 The existing cards (those issued before March 16, 2020) shall be mandatorily disabled for online transactions, international transactions (physical/offline) and contactless transactions if you have never used the card for such a purpose. This is a very good move, although it can cause operational hassle sometimes. So, if you have never used your card for online transactions, it will be automatically disabled for online transactions.  You will have to request you bank to enable it if you want to use such a card for online transactions. Similarly, if you have not used a card for international transactions, you will have to request your bank to enable it before you swipe it abroad. The process of international transactions is the same even now. Currently, you must inform the bank of your travel or else the transactions abroad are usually not accepted. The banks do it to prevent frauds. Now, this is a regulatory requirement.

#4 The banks must now provide the facility to switch on/off and set/modify transaction limits (within the overall transaction limit for all types of transactions i.e. domestic/international/ATM/ PoS/online/contactless transactions. Your credit limit may be Rs 1 lacs but now you can set your PoS transaction limit at 10,000 and online transaction limit at Rs 5,000. You can even disable it for certain types of transactions. For instance, if you wish, you can disable your card for online or contactless or international transactions. A few banks already do that. However, with these regulations, every bank must now offer this facility mandatorily. A very good move indeed.

#5 This facility to switch on/off and modify transaction limits shall be available 24X7 through multiple channels including mobile apps, internet banking/ ATMs/ IVR. The bank may (not mandatory) offer this service at its branches/offices too.

#6 You will receive an alert/information/status through SMS and e-mail, whenever there is a change in status of the card.

What Do I Think?

This is a very customer-friendly regulation. Banking frauds (both online and physical) are on the rise. Many times, these frauds happen on inactive accounts or cards. Since the default option is to disable the card for most types of transactions, such frauds can be prevented.

Even for those who use their credit or debit cards frequently, these regulations will go a long way in reducing such frauds and also the impact of such frauds even if a fraud were to happen. For instance, you now have option to cap transaction size for online transactions or even disable it. Therefore, you can simply disable online transactions or keep the transaction limit very low. When you need to use such a card for online transaction, you can temporarily increase the limit and reset it back to default (or disable) once the transaction is done. You will be able to do it using the bank mobile app. 

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