Following the increasing incidence of card frauds, Reserve Bank of India (RBI), the banking regulator of India had come out with a regulation on Feb 28th 2013 directing banks to replace all magnetic strip based credit and debit cards used for international transactions with chip based credit and debit cards. RBI had said that cards which have been used atleast once for international transactions will come under the ambit of replacement. The newly required EMV (Europay, Mastercard and Visa) chip embedded card will also be Personal Identification Number (PIN) enabled, and is seen as a measure to curb cyber security frauds. RBI has also directed that new debit and credit cards will be allowed for usage in India only, and the customer will be provided an international card only if he asks for it. There will also be a threshold limit specified by the bank for international transactions, which will be based on the risk profile of the customer. The changes were required to be completed by Indian banks before June 30th 2013.
Although RBI’s initiative to prevent credit and debit card fraud is commendable, this move has caused inconvenience to Indian banks, customers and even a lot of Indian e-commerce companies. It is sure a daunting task to migrate over 333 million cards in the country to the new system in such a short span of time. Apart from the complexity of the task itself, which requires considerable amount of time, the cost factors have also been considered to be a negative. The chip based cards are currently atleast five times more costly than the traditional magnetic strip cards. According to an executive of a leading bank in India, it would cost atleast Rs.150 to Rs.200 each on replacing magnetic cards with chip cards. Add to this the logistical and infrastructure issues involved with the change and it is expected that this will take more time to be implemented at a nationwide level.
Following this, it is seen that several banks in the country have not yet implemented the change required by the banking regulator. As a result, with some stakeholders approaching the RBI for an extension in the deadline, the central bank has pushed the last date for implementation to November 30th 2013. This includes not only the compliance of enhanced security features like the EMV chip, but also includes other provisions of the notification like the use of a PIN, real time fraud monitoring and the limits imposed on international transactions.
The technical glitches which had to be sorted, along with the magnitude of change needed is believed to have prompted this move. RBI has also kept in mind the needs of the customers, so that they are not inconvenienced in any way. Some banks have however implemented this system, keeping in mind the original deadline of June 30th 2013. Leading card issuers like ICICI Bank, Citibank, HDFC Bank, SBI Cards and Axis Bank have rolled out chip based cards in some categories. So if you are one of those who have received the new card and also have the old card, then what should you do? Banks normally grant an overlap period, during which both the old and new cards can be used. Beyond this, the old card will automatically become inactive. On the other hand, if your bank has not yet given you the new card, you can approach your branch to find out when you will be receiving the new card. Make sure to update your contact details so that your card reaches you on time.
Although the costs involved in the migration can be high, many banks have started offering the cards at no extra charge to customers. However, some exceptions are expected, with banks levying nominal fees for issuing such cards. Nevertheless, bankers view it as a fair price to pay for more secure transactions. In view of the increasing importance to safeguard electronic transactions, it is not expected that RBI will grant a further extension on this matter beyond November 30th 2013. More clarity on the fees and charges is expected at a time closer to this deadline.