Cards never used for online transactions will be disabled: RBI

To increase the security of card transactions, the Reserve Bank of India (RBI) has asked card issuers including banks to disable online payment services of all those credit and debit cards that have never been used for an online or contactless transaction.

“Existing cards which have never been used for online (card not present) or international or contactless transactions shall be mandatorily disabled for this purpose, ” said RBI in a notification.  

Once disabled, the card users will have to apply again to avail its services.

The central bank has further allowed banks to take decisions based on their risk perception whether to disable card transactions such as card not present transactions, card-present transactions and contactless transaction rights. 

According to the definition, in card-present transactions, the customer physically interacts with the payment machine using his or her card whereas, in card not present transaction, the cardholder does not physically present the card for a merchant's visual examination.

In contactless payment, consumers buy products or services using a debit, credit, or smartcard using RFID technology. 

Besides, RBI  directed card issuers to further activate cards only at contact-based points of usage.

“At the time of issue or re-issue, all cards (physical and virtual) should be enabled for use only at contact-based points of usage like ATMs and point of sale (PoS) devices within India,” the notification added.

The provisions of this circular are not mandatory for prepaid gift cards and those used at mass transit systems. The central bank's direction will come into effect from March 16, 2020.

The move is aimed at curbing card frauds and implement uniformity across India's banks.

In the last few years, the volume and value of transactions made through cards have gone up. In the fiscal year ending March 2019, the volume of card transactions climbed to 1,60,462 lakh and value at Rs 45,12,210 crore. Of this, debit card volumes were 1,42,738 lakh and value at Rs 39,04,264 crore.

Of late, the government has been taking measures to promote digital payments.

Last month, the government ruled that no Merchant Discount Rate charges will be applicable on transactions through homegrown RuPay and UPI platform beginning January 1, 2020.