The RBI's card-on-file (CoF) tokenization regulations come into effect from 1st October 2022, altering the online payment regulations for debit and credit cards. These new regulations are expected to improve the payment options for cardholders and make it easy. These rules include the permission to set credit card limits, the tokenization of credit cards and the card issuer seeking a one-time password (OTP). Read below to understand how they affect you.
1. Credit card limit change permission:
While some cardholders may love the idea of an automatic increase in their card limit. But do you know that an increase in the card limit affects your CIBIL score (an increased card limit essentially means that you have borrowed this limit from the bank. A higher limit negatively impacts your CIBIL score). With the new changes brought in by RBI from the 1st of October, 2022, the issuer of the card will no longer be able to automatically increase the credit card limit. In addition, any change in the credit limit must be approved by the cardholder. RBI has further mandated that written consent will be needed by the issuer before modifying the card limit.
2. Credit Card Tokenisation:
Earlier while shopping at online platforms, the websites used to keep your card details such as credit and debit card numbers, names, and CVVs for the future but it was risky in terms of safety. In case of a website hack or data breach, your card details can get leaked which can turn out into a serious problem. Third-party payment apps use card details to transfer payments from banks to platforms. As a result of encrypting credit card numbers, the RBI has developed a card tokenisation system to secure such transactions. By implementing the new rules, customers' credit card numbers will no longer be used for transactions by third-party payment apps. Now, the credit card numbers will be encrypted into a token number that will be used for transactions. This rule is going to be mandatory from 1st October 2022.
3. Card-issuers to seek One Time Password (OTP):
Earlier, there have been numerous cases reported where credit cards have been activated and charged without the knowledge of the credit card holders. But now with the new rule implemented, this will not happen and the card issuer will not be charged. Now, whenever a cardholder has not activated the card for more than 30 days after it was issued, the issuer will need to first obtain a one-time password (OTP) from the cardholder. Moreover, if a cardholder declines the request to activate the card, the credit card issuer must deactivate the card within seven working days without charging any additional fees.
Now with the implementation of these new Reserve Bank of India (RBI) rules, the safety standards have increased is more. These three new Reserve Bank of India (RBI) rules will affect you in a good way by improving the payment options for cardholders.