Want to shop with credit, debit cards? Carry photo ID

New Delhi: Next time you flash your credit or debit card to make any payment, be ready to carry along a photo identity card, as banks have asked merchants to do so to check any fraud, especially for high-value purchases.

With the growing usage of credit and debit cards, the instances of fraud related with them are also growing in the country. There are an estimated five crore credit cards and an average of about 2,000 frauds are reported every month. In addition there are close to 30 crore debit cards.

To prevent the card frauds, which are mostly perpetuated by impersonation through stolen, lost and hacked cards, the central bank RBI has already suggested a number of steps to be implemented by the banks.

On top of it, the banks are now asking the merchants to further verify the identity of the cardholders through authoritative photo identity proofs like PAN Card, Passport or Voter ID cards.

The country's largest private sector bank, ICICI Bank, also the biggest credit card issuer in India, has communicated to its customers that "photo identity proof might be required at merchant outlets for high-value card transactions."

Asking the customers to cooperate, the bank has further told them that "this check is against fraudulent usage of your credit/debit cards at merchant outlets."

A number of other banks have also informed the customers as also the merchants about the additional identity verification mechanism to prevent the frauds.

The issue of card fraud has even reached Parliament and in February the government informed the Lok Sabha that ICICI Bank alone reported more than 8,000 cases of credit card fraud worth over Rs 11 crore to the RBI between April and December 2008.

Besides, HSBC, another major credit card player in the country, reported close to 2,500 cases of fraud worth about Rs 5 crore during the same, while thousands of such cases, resulting into losses of several crores of rupees, were together reported by players like American Express, Citibank, Standard Chartered Bank and Deutsche Bank.

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

Even the RBI has taken note of the surge in frauds, which has come with the growth in card usage. According to the apex bank, 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 per cent.

Besides, the debit card transactions surged by over 50 per cent to Rs 12,521 crore from Rs 8,172 crore during the same period.

"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.

It has also suggested cards with photographs of the cardholder, cards with PIN and signature laminated cards or any other advanced methods that might evolve from time to time.

"Banks are advised 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 has said.