The Reserve Bank of India (RBI) has asked banks and card issuers across the country to disable online payment services of all those credit and debit cards that have never been used for online/contactless transactions, in a bid to enhance the security of cardholders.
“Existing cards that have never been used for online/international/contactless transactions shall be mandatorily disabled for this purpose,” said the central bank, in a notification on Wednesday.
For existing cards, which have seen the online or ‘card-not-present transactions’, the banks have been directed to carry out a risk assessment and take a call on disabling them based on the risk perception.
Card transactions are usually divided in two categories — card-present transactions and card not present transactions. In the case of the former, the customer physically interacts with payment machinery using his or her card and in case of the latter, the cardholder does not or cannot physically present the card for a merchant’s visual examination.
Contactless payment is a secure method for consumers to purchase products or services using a debit, credit, or smartcard — also known as a chip card — by using RFID technology or Near-Field Communication.
The new rules will come into effect from March 16, 2020 — two months from now. Once disabled, the card users will have to reapply for the services.
Banking industry sources suggest that the cards are susceptible to frauds and there is no uniformity in practices across banks. The rule has been devised with the aim of protecting the interest of rural folks — who are seen more gullible to digital frauds.
India has more than 800 million debit cards in circulation, while there are about 50 million credit cards adding on the government’s attempts to digitise the economy.
The central bank has directed card issuers to further activate cards only at contact-based points of usage.
“At the time of issue/re-issue, all cards (physical and virtual) shall be enabled for use only at contact-based points of usage (viz ATMs and point of sale devices) within India. Issuers shall provide cardholders a facility for enabling card not present (domestic and international) transactions, card-present (international) transactions and contactless transactions,” the circular said.