RBI to remove additional factor of authentication for small value card transactions

RBI has issued a draft circular dated 13th march 2015 for comments. In that circular, it has been decided to relax the extant instructions relating to the need for additional factor of authentication requirements for small value card present transactions only using contact-less card payments using NFC.

rbi circular

Through this draft circular RBI has advised that –

  • Relaxation for additional factor of authentication requirement is permitted for transactions for a maximum value of Rs 2,000/- per transaction; banks are free to set lower per transaction limits.
  • The contactless cards should necessarily adhere to EMV standards.
  • Suitable velocity checks (daily, monthly, etc) shall be put in place by banks as agreed upon by the customer.
  • for transaction value above the threshold limit of Rs 2000/- PIN (AFA) will be mandatory.

Banks are advised by RBI to clearly explain to customers about the technology, its use, risks and liability while issuing contact less or NFC cards. It has also been advised to clearly indicate the maximum liability devolving on the customer, if any, at the time of issuance of such cards, along with the responsibility of the customer to report the loss of such cards to the bank immediately through multiple channels made available by the bank and to put in place robust mechanisms for seamless reporting of lost/stolen cards which can be accessed through multiple channels (website, phone banking, SMS, IVR etc.

The requests have been examined by RBI from the perspective of the trade-off between security and convenience in card transactions and need for relaxation in extant instructions with suitable safeguards to protect customer interest in light of availability of new technologies. One such technology is that of Near Field Communication (NFC) which is used in contactless cards .The contactless cards are chip card which provides security as well as convenience.

It may be noted that the above relaxations shall not apply to, ATM transactions irrespective of transaction value and Card not Present transactions (CNP).

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