High-value credit or debit card purchases may require buyer to flash ID proof

There are reportedly close to 50 million credit card holders and 300 million debit card holders in India and every month, banks have been receiving at least 2000 complaints relating to purchases made using stolen or lost credit and debit cards.

To prevent such fraudulent transactions, which are mostly perpetuated by impersonation through stolen, lost and hacked cards, the Reserve Bank of India (RBI) has already suggested a number of steps to be implemented by banks, such as requiring cardholders to register their cards under the "Verified by Visa" or "Master Card 3D-Secure" program before August 1, 2009 to enable cardholders to continue using their cards for future online transactions.

In case of offline transactions, banks have urged the merchants to verify the identity of cardholders through authoritative photo identity proofs such as PAN card, Driver's License, Passport or Voter ID card.

As an additional security measure, some banks have also begun issuing credit and debit cards bearing the photo of the cardholder.

To further guard against frauds, the banks have also started sending SMSs to the customers the moment some high-value purchases (usually above Rs.1000) are made, so that the real cardholders can immediately seek remedial actions if they had not actually made the transaction.

The banks have also requested customers to cooperate by issuing notices that such steps are being taken to "check...against fraudulent usage of your credit/debit cards at merchant outlets."

According to a RBI official, such measures are being taken, as with the growth in card usage, there has been a surge in fraud cases.

According to the official, the value of credit card transactions increased from Rs.41,361 crore in 2006-07 to Rs.57,958 crore in 2007-08, representing a surge of over 40 percent.

During the same period, the debit card transactions surged by over 50 percent to Rs.12,521 crore from Rs.8172 crore.

Between April and December 2008, several private sector banks including ICICI Bank, HDFC Bank, Axis Bank, Kotak Mahindra Bank, HSBC, Citibank, Standard Chartered Bank, ABN Amro, Deutsche Bank reported close to 15,000 cases of credit card and debit card fraud worth over Rs.20 crore to the RBI.

"The total value of credit card transactions has more than trebled between 2003-04 and 2007-08. This trend is likely to continue. Since credit card transactions are increasingly prone to fraud, it is critical to stay abreast of the latest developments in this area to combat fraud effectively," the RBI said earlier this year.

As part of the fraud control measures, the RBI has suggested banks setting up internal control systems to combat frauds and actively participate in fraud prevention committees/task forces which formulate laws to prevent frauds and take proactive fraud control and enforcement measures.

The apex bank has also urged commercial banks to "block a lost card immediately on being informed by the customer and formalities, if any, including lodging of FIR can follow within a reasonable period."

"(The) Reserve Bank of India reserves the right to impose any penalty on a bank/NBFC under the provisions of the Banking Regulation Act, 1949/the Reserve Bank of India Act, 1934, respectively for violation of any of these (fraud control) guidelines," it had said.