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Economy Dec 13, 2012

RBI tightens norms: Banks can't issue offline debit cards anymore

The Reserve Bank of India has tightened the rules for issuing debit cards.

It stipulated that debit cards would be issued to customers having Savings and Current Accounts but not to cash credit or loan account holders.

Secondly, it also said banks may issue only online debit cards, including co-branded debit cards and rupee denominated co-branded pre-paid cards, without seeking the prior approval of the central bank.

AFP

"Banks are, henceforth, not permitted to issue offline-debit cards. Banks which are now issuing offline debit cards may conduct a review of their offline debit card operations and discontinue operations of such cards within a period of six months from the date of this circular," RBI said in a notification to all banks.

As an Indian Express story explains, it means anybody swiping a debit card in a shop will soon have to type in their PIN. These are online debit cards and will replace all offline debit.

To prevent the use of stolen cards, the RBI has asked banks to consider issuing debit cards with photographs of the cardholders on them.

"With a view to reducing the instances of misuse of lost/stolen cards, banks may consider issuing cards with photographs of the cardholder or any other advanced methods that may evolve from time to time," the RBI said while issuing guidelines for issuance of debit cards.

The guidelines were issued after a comprehensive review of existing instructions on issue of debit cards. There are over 31 crore debit cards in the country.

The RBI said the bank would be responsible for direct losses incurred by a cardholder due to a system malfunctions directly within the bank's control.

However, the bank shall not be held liable for any loss caused by a technical breakdown of the payment system if the breakdown of the system was recognisable, the guidelines said.

The responsibility of the bank for the non-execution or defective execution of the transaction is limited to the principal sum and the loss of interest, it added.

Banks have also been asked to ensure full security of the debit card. The losses incurred by any party on account of breach of security or failure of the security mechanism would be borne by the bank, RBI said.

The RBI further said that "each bank shall provide means whereby his customers may at any time of the day or night notify the loss, theft or copying of their payment devices".

After receiving complaint of loss, theft or copying of the card, the bank should take all action to stop any further use of the card, RBI said. It asked banks to put in place an effective mechanism for redressal of customer complaints.

With inputs from PTI

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