Banks cap foreign spends on cards to check frauds

Move aimed to reduce scope of frauds as electronic payment systems are becoming vulnerable to misuse

Banks have started capping international spending limits on debit and credit cards. The move is aimed at reducing the scope of frauds, as electronic payment systems are becoming vulnerable to misuse.

In the last couple of weeks, a few foreign and domestic banks sent text messages or e-mails to their card customers, informing them their cards would have limits for international transactions. These limits, however, will only be applicable for foreign transactions and will not impact any spending done within India. Customers have also been allowed to increase or decrease the cap by contacting their respective banks.

“So far, there were two types of limits on credit cards—the overall credit limit and the cash limit. Now, additionally, there will be an international spend limit. But all these limits will be a subset of the customer’s overall credit limit. The foreign spend limit will be less than or equal to the overall credit limit of the customer,” said the head of retail lending at a private sector bank, requesting anonymity.

Bankers said international spending limits had been introduced on both debit and credit cards to minimise the risk of cyber attacks and frauds. In the last few years, many customers have claimed their credit or debit cards were misused immediately after they returned from abroad.

In February, the Reserve Bank of India (RBI) had, as part of its security and risk-mitigation measures for electronic payment transactions, told banks all new debit and credit cards must be issued for domestic use alone, unless a customer specifically sought international use. It also said banks must issue only EMV chip cards to customers who sought to use the cards abroad.

Banks were also directed to convert all magnetic stripe cards to EMV chip cards for all customers who have used their cards in another country. In the same circular, RBI had said, “All the active magnetic stripe international cards issued by banks should have a threshold limit for international usage. The threshold should be determined by the banks based on the risk profile of the customer and accepted by the customer.”

A senior executive with a foreign bank in India said, “RBI has not specified the foreign spend limit. It was decided by us depending on the risk profile of the customer. We try and ensure the limit is reasonable. The customer can also change this limit by sending us a request.”

Bankers said, initially, RBI wanted banks to implement the cap on international spending by June 30, 2013. However, the deadline was extended because of the large number of cards in circulation. According to RBI data, as of August-end, there were 18.46 million credit cards and 362.34 million debit cards in India.