• Customers can only use ATM facility 
• New rules from March 16, 2020

New Delhi: In a bid to improve user convenience and increase the security of card transactions, the Reserve Bank of India (RBI) has asked all 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 or contactless transactions.

“Existing cards that have never been used for online/ international/ contactless transactions shall be mandatorily disabled for this purpose,” said the RBI, in a notification yesterday. However, card-holders will be able to make ATM transactions.  

Card transactions are usually divided into 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 card-holder 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 Radio-Frequency Identification (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.

For existing card-users, banks can also take a decision whether to disable the card for domestic and international transactions, online and contactless transaction rights based on their risk perception. 

To protect rural folk 

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 folk who are said to be 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.

Enable/disable cards 

The RBI has also asked all banks to give card-users, credit and debit, the facility to enable/disable their cards for different types of use. These include online, physical, contactless domestically or internationally.

Card issuers have also been asked to allow card-holders to modify transaction limits within the overall card limit for all types of transactions — domestic and international at the Point of Sale (PoS), ATMs, online transactions and contactless transactions.

RBI has directed the banks and other card issuers to enable cards only for use at contact-based points, that is, ATMs and Point of Sale devices within India at the time of issue of the cards. This means that when a card is issued it will, by default, only be usable to physically swipe at a Point of Sale or at an ATM. It would not be enabled for use online or for contactless transactions.

 If customers want to use their cards for online transaction, international transactions and contactless transactions, they have to separately apply for these services.

The facility will be available on a 24×7 basis through multiple channels — mobile application / internet banking / ATMs / Interactive Voice Response (IVR). This may also be offered at branches / offices. RBI has mandated that issuers provide alerts / information / status, etc., through SMS / e-mail, as and when there is any change in status of the card.