RESERVE BANK OF INDIA

Developments in Payment and Settlement Systems Introduction of MICR Introduction of MICR Electronic Funds Transfer Electronic Funds Transfer  Retail EFT  Electronic Clearing Services (ECS)  Credit  Debit Real Time Gross Settlement (RTGS) System Real Time Gross Settlement (RTGS) System Cheque Truncation System Cheque Truncation System

RBI Payment System Vision Mission Statement Mission Statement Safety-Security-Soundness-Efficiency Safety-Security-Soundness-Efficiency Card system represent change from cash based system to a safer, more efficient and convenient system Card system represent change from cash based system to a safer, more efficient and convenient system

Cards and Indian PS Vol (crores) Val (Rs crores) Vol (crores) Val (Rs crores) Paper ,47,052 EB ,57,341 Tot ,04,393 Cds ,120 Note –EB includes card

Card Systems Debit Cards (31.1 million) Debit Cards (31.1 million) Credit Cards (12.2 million) Credit Cards (12.2 million) SMART Cards (Few) SMART Cards (Few) Total Volume and Value Total Volume and Value PeriodVolume (crores) Value (crore- Rs)

Growth in card payments  Convenience of ATMs and POS terminals - debit cards  Higher disposable incomes  Retail boom– both in goods and services  Higher merchant acceptability  Growth in technology –new card products

Issuance of Cards Banks issue cards in affiliation to Visa, Mastercard etc Banks issue cards in affiliation to Visa, Mastercard etc  44 banks issued cards as on July 2005  37 banks issued Debit Cards  23 banks issued Credit Cards  1 banks issued SMART Cards  Co-branded Cards  Cards issued by non-banks

Legal Base Relationship between card companies and card issuing banks Procedures Procedures Guidelines Guidelines Terms and Conditions Terms and Conditions Relationship between card issuing banks and cardholders Terms and conditions of card issue and usage Terms and conditions of card issue and usage

Card issuing banks have own policies on disclosure, transparency, customer grievances redressal Card issuing banks have own policies on disclosure, transparency, customer grievances redressal Methods of working vary– foreign & new private banks more likely to outsource work- - marketing of card products and recovery/ collection Methods of working vary– foreign & new private banks more likely to outsource work- - marketing of card products and recovery/ collection Marketing techniques -foreign/ new private banks - more aggressive Marketing techniques -foreign/ new private banks - more aggressive

Regulatory Mechanism  CREDIT CARDS Banks with Networth of Rs.1000 million and above Banks with Networth of Rs.1000 million and above Banks can issue by credit cards by themselves or in tie-up with another bank Banks can issue by credit cards by themselves or in tie-up with another bank No prior approval of the Central Bank is required No prior approval of the Central Bank is required  The banks issuing need the approval of their Board RBI has laid down broad guidelines RBI has laid down broad guidelines  Customer selection  Sharing of information  Fraud Control  Transparency in fees  Account processing  Recovery of dues

DEBIT CARDS DEBIT CARDS Banks can issue on-line debit cards/ smart cards without prior RBI approval - Board approval adequate. Post issue reporting to RBI. Banks can issue on-line debit cards/ smart cards without prior RBI approval - Board approval adequate. Post issue reporting to RBI. Off-line debit cards issue requires prior approval of RBI. Off-line debit cards issue requires prior approval of RBI.

Issues for Regulator Commercial banks are subject to stringent regulation and supervision by the RBI Commercial banks are subject to stringent regulation and supervision by the RBI Complaints against card issuing banks Complaints against card issuing banks Unsolicited phone calls-marketing cards Unsolicited phone calls-marketing cards Lack of transparency in terms &conditions Lack of transparency in terms &conditions Unsolicited cards/ unauthorised activation Unsolicited cards/ unauthorised activation Wrong billing /delay in credit of payments Wrong billing /delay in credit of payments Harassment / coercion by recovery / collection agents Harassment / coercion by recovery / collection agents Divulging customer information/ misuse of info Divulging customer information/ misuse of info

Working Group Members from major card-issuing banks, Indian Banks Association, and also consulted consumer organisation Members from major card-issuing banks, Indian Banks Association, and also consulted consumer organisation Working Group submitted report in March Working Group submitted report in March TRANSPARENCY AND DISCLOSURE TRANSPARENCY AND DISCLOSURE CUSTOMER RIGHTS PROTECTION CUSTOMER RIGHTS PROTECTION CODE OF CONDUCT CODE OF CONDUCT

RBI draft guidelines for cards Issued on 28 th June 2005 Issued on 28 th June 2005 Incorporates WG recommendations Incorporates WG recommendations Addl guidelines- Addl guidelines- Bks to have well documented guidelines &fair practices code Bks to have well documented guidelines &fair practices code (a) Cards for persons with independent financial means (add- ons exempted) (b) Maximum credit limit (c) Sufficient time for bill payment (d) Wrong billing complaint-bks to provide explanation and doc evidence (e) Complaints redressal machinery

Frauds Frauds in India mainly emanate from Frauds in India mainly emanate from  Account use  Counterfeiting  Stolen / lost cards  Multiple imprints  Fraud application  Interception of cards sent by post / courier, cross-border use Card frauds as a percentage of transactions varies approx. 0.1% to 0.3% in India Card frauds as a percentage of transactions varies approx. 0.1% to 0.3% in India

Frauds …..contd Banks in case of misuse of stolen / lost cards limit the cardholders liability to amount spent till the card issuing bank is informed about the theft / loss Banks in case of misuse of stolen / lost cards limit the cardholders liability to amount spent till the card issuing bank is informed about the theft / loss Many countries limit the cardholders liability to a particular sum incase of theft / loss Many countries limit the cardholders liability to a particular sum incase of theft / loss Merchants rarely check the signatures of cardholders Merchants rarely check the signatures of cardholders Frauds could be substantially reduced by giving cardholders secret PIN to be punched before every transaction Frauds could be substantially reduced by giving cardholders secret PIN to be punched before every transaction Use of smart cards Use of smart cards

It is RBI’s endeavour to see that healthy growth of the card payment industry in the country while at the same time ensuring that payment risks are suitably mitigated, customer interests protected and highest standards of customer service maintained It is RBI’s endeavour to see that healthy growth of the card payment industry in the country while at the same time ensuring that payment risks are suitably mitigated, customer interests protected and highest standards of customer service maintained

Thank you