Citibank reports maximum cases of debit/credit card frauds

Citibank has witnessed maximum 92 frauds of cloning of debit/credit cards or use of fake cards involving over Rs 1.89 crore from 2007-08 to December 2010.
"Largest number of such frauds belong to Citibank from 2007-08 to December 2010...RBI's committee has suggested a number of steps including replacing the magnetic strip on cards by a chip. All these aspects are being looked into," Finance Minister Pranab Mukherjee said in Lok Sabha during Question Hour.
Compensation to the victims, who lost money in these frauds, is another aspect which is being looked into by the banks.
Besides Citibank, other banks which reported such frauds are one each by Syndicate Bank, Standard Chartered, Punjab National Bank and Canara Bank in 2010 involving a total amount of less than Rs 23 lakh.
Bank of India reported one case of fraud in 2007-08 but the amount involved is huge at over Rs 1.92 crore.
Mukherjee said the Committee, headed by Executive Director, RBI has given various suggestions and a decision would be taken soon in this regard.
Besides, the RBI has also issued a series of instructions relating to Know Your Customer (KYC) to the banks so that identification could be authenticated before issuing a debit or credit card, the Minister said.
He said criminal investigations have also started against people involved in such frauds.
The RBI has issued a Master Circular on " credit card Operations of banks" recently advising the banks to set up internal control systems to combat frauds and to take pro-active fraud control and enforcement measures, Mukherjee said in his reply.
The Central bank has also advised banks to ensure that credit card operations were run on "sound, prudent and profitable" lines and fulfil "Know Your Customer" requirements, assess credit risk of customers, specify terms and conditions in clear and simple language and ensure prompt dispatch of bills.

Credit Card: Boon or Curse

Credit cards are whether a boon or a curse entirely depends on usage. On one hand it can help one out of any money problems, providing a financial lifeline and helping in case of severe cash flow problems but on the other hand they are pure temptation which can easily lead into debt trap (financial ruin).
Experts keep advising on the Dos and Don’ts, tricks and tips to use cards etc. They help you learn various ways in which you can benefit from credit cards like avoiding carrying hard cash, being able to pay for larger (expensive) items and then repay the balance gradually, and being able to cruise through temporary cash crunches.
There are few people who keep credit cards just to spend extravagantly, not for the benefits like convenience, ease, and flexibility offered by these cards. Some believe it a status symbol while few spend on cards just because they can afford to!
This kind of spending can easily lead one into a debt trap. In fact according to research this is the main reason for most to end up in personal debt. Then people are forced to take loans to tide over credit card dues and get caught in vicious circle of debt. Credit card should not be used to buy all sorts of luxuries, pay for holidays which you cannot afford. Neither should one buy the latest gadgets and high tech devices at high prices just to show off your purchases. Credit card is a responsibility. You need to look at how much you have to spend, how will you repay the money and how much interest will you have to pay.
Reports have revealed that people choose their credit card based on the credit limit offered by the bank rather than the rate of interest they would be charged. One reason for this could be the fact that they want to stretch the card limit to the maximum. One should always choose a card that gives best terms with lowest rate of interest. One should be careful in spending on a card and most importantly spend as much as one can afford. One should avoid falling into a debt trap from which it could get difficult to emerge by making diligent payments. If one is careful, credit cards will always be a Boon and never a Curse.

Usage of debit cards ups as compared to credit cards

Indians are using more of debit cards than credit cards for their banking transactions, says the Reserve Bank of India (RBI) data for the year ended 2009-10. While the transactions through debit cards jumped by 42 per cent at Rs 26,418 Cr in the last fiscal from Rs 18,547 Cr in 2008-09, it slipped by 4 per cent for credit cards to Rs 62,852 Cr from Rs 65,356 Cr.
In the same period, the number of debit cards in circulation has also increased by 33 per cent as compared to a fall in credit card circulation by 10 per cent over the previous year.
The total number of debit cards increased to 17 Cr in 2009-10 from 12.8 Cr in 2008-09. On the contrary, the total number of credit cards went down to 23.4 Cr in 2009-10 from 25.9 Cr in 2008-09.
“Shopping through debit card has become more convenient now due to rise in point of sale terminals in various shopping centres,” says Subrat Pani, business head- cards, Kotak Mahindra Bank. "Volume of transaction has increased due to easy availability of debit cards, which are given with every newly opened bank account."
Industry experts also attribute the popularity of debit card to the cautious attitude of Indian consumers as a result of the recent economic downturn.
“While debit card can enable the consumer to track their spending better, it is also a great payment tool for those who are credit averse or are not credit worthy,” says a senior official at VISA, who did not wish to be named.
Downturn in the economy was the major reason for negative trend in credit cards. “During the slowdown, banks became cautious in issuing new credit cards to check defaults. Also, last year many lost their jobs which led to the decline in spending through credit cards,” said Pani.

20 lakh credit cards flushed out by March 31: Banks

Around 20.35 lakh credit cards will be flushed out of the system by March-end, according to a study done by Venture Infotek, India’s leading payment solutions provider. It has shown a sharp drop to 226.64 lakh cards by March-end, from 246.99 lakh cards as on March 2009, says the report titled ‘Payment Card Industry 2009’.

On the flip side, banks will increase their debit card count by 358.44 lakh cards to end the year with 1,732.75 lakh debit cards, says the study.

Leading the bandwagon to reduce credit card count is ICICI Bank, which will cut close to 15 lakh credit cards by the end of the financial year — to 55 lakh cards from 70 lakh as on March 2009.

The report, published annually, shows other leading banks too are reducing their credit card counts. While State Bank of India is slashing its credit card count from 27 lakh to 25 lakh, Citibank is reducing it from 25 lakh to 18 lakh. ABN Amro will reduce its card count from 13.05 lakh to 10 lakh while Standard Chartered will slash it from 13 lakh to 11 lakh by the end of present financial year.

“Banks have realised that it is not easy to run a credit card business in this country as losses for some of the leading players had peaked to almost 30-35 per cent in the past. Hence, most banks are reducing their credit card exposure,” said Abizer Diwanji, an executive director (banking) with KPMG.

While there is a sharp drop in the total number of credit cards, some banks such as HDFC Bank, HSBC, Barclays credit card, Axis Bank and Canara Bank are being gung ho about increasing their credit card portfolios. According to the report, around 9.77 lakh cards will be added by these five banks.
Interestingly, all banks have seen a surge in their debit card portfolios. “The industry is expected to add around 358.44 lakh debit cards by the end of the present financial year,” the report said. SBI, ICICI Bank,

Axis Bank, HDFC Bank and Punjab National Bank are among the leading banks that are likely to see biggest surge in their debit card portfolios.

According to the head of cards with a leading private bank, the surge in debit cards is mainly on the back of a rise in the number of new accounts.

To drive their transaction banking business, Indian banks have been aggressive about adding ATMs in the country. All the 39 banks covered under the survey are together expected to increase ATM counts in the country to 58,850 by the end of March 2010.

“ATMs are expected to grow by 35 per cent during 2009-10 while SBI alone is expected to add close to 9,000 ATMs,” the report says.

ICICI Bank sells terminals of card payment

ICICI Bank has concluded the sale of its network of electronic point of sales (PoS) terminals that accept Credit Card and Debit Card payments to First Data Corporation (FDC). The bank has hived off its network of over 1.5 lakh electronic swipe machines to a separate company — ICICI Merchant Services. First Data has bought an 81% stake in the company which has been valued at a little over $90 million.
When contacted, ICICI Bank refused to comment on the transaction. The bank has, however, communicated to merchants having ICICI Bank terminals that the PoS network has been transferred to ICICI Merchant Services. “First Data, along with partner banks, is keen to proliferate payment transactions not just at top retailers but also through small cities or towns in India,” said Amrish Rau, country manager, First Data Corporation.
Referring to the transaction with ICICI Bank, Mr Rau said an announcement would be made in due course. Mr Rau, who represents First Data in the country, is likely to head the new payments company. First Data is a US-based company that has been created after banks farmed out their back office processing systems into a separate company. FDC is presently owned by private equity giant KKR.
The Reserve Bank of India has already given clearance for the deal. According to banking sources, the deal value has gone up after RBI said that merchant establishments, including grocery stores and supermarkets, could swipe customer cards and offer them cash.
In addition to unlocking value, ICICI Bank expects that the specialised company will bring down transactions costs and also grow the payment network more efficiently. This is the first time that an Indian bank has hived off its PoS terminal network.
So far it has been foreign banks that have outsourced these functions but their network is of much smaller scale.
ICICI Merchant Services will earn a fee every time a credit cards or debit cards transaction is processed through the point of sale network. The fee is usually borne by the merchant and a large part of it goes to the card issuing bank. This is in lieu of the credit that the issuing bank extends to the cardholder until the end of the billing cycle. A smaller part of the commission goes to the bank owning the PoS terminal (acquiring bank) and smaller portion to the payment company — Mastercard or Visa.
Incidentally, State Bank of India has for some time expressed its intention to set up a network of half a million point of sales terminals. To build this network the bank had earlier sought partners. However, the project was shelved as the bank decided to take a more holistic approach of its payments business.