Reserve Bank of India has made it mandatory for banks to put in place additional authentication/validation for all on-line/ IVR/MOTO/recurring transactions based on information not available on the credit/debit /prepaid cards (according to the circular issued on September 22, 2011). A majority of the cards issued by banks in India are Magstripe cards and the data stored on such cards are vulnerable to skimming and cloning.
The increased usage of credit/debit cards at various delivery channels also witnessed the increase in the frauds taking place due to the cards being lost / stolen, data being compromised and cards skimmed/counterfeited. There is, therefore, an imperative need to secure such card based transactions as well to protect the interests of the card holders. Towards this end, RBI constituted a Working Group in March, 2011 and this group has recommended the use of EMV Chip card with Personal Identification Number on card.
Chip Card is a card containing a chip in it as the chip is not visible. This card contains all information in an encrypted format. It has a Personal Identification Number (PIN).Instead of swiping and signing for a purchase the card holder punches in the PIN.
Chip and PIN cards are designed to prevent credit card frauds. Magnetic strip cards however can be cloned by skimmers whereas cloning cards with Chip is impossible as you can not forge the PIN. A Chip based card is expensive than a magnetic strip card. It costs between Rs 200 and 300. While a magnetic card costs Rs 100 to Rs 150.
So far, Axis Bank Ltd, HDFC Bank Ltd, State Bank of India (SBI), ICICI Bank Ltd and Kotak Mahindra Bank Ltd, Citi Bank,IndusInd Bank are issuing chip enabled cards.
Use of both Strip & Chip in Cards
As of now, most chip-based cards can be used at POS terminals, but ATMs are currently not enabled for acceptance of EMV chip cards. However, approximately 50% of the existing ATMs are capable with upgrades to hardware and software. The rest 50% of the ATMs need major hardware upgrade (or even replacements) to enable chip card acceptance.” Keeping this in mind, few banks now offers cards which have both a chip and a magnetic strip on them.
The Reserve bank has made it mandatory for all banks to issue chip based cards by June to secure your transactions.