RBI to track big spends on global debit cards

Big brother is watching. The Reserve Bank of India today directed banks to closely track the spends of an international debit card holder and report to it if the aggregate spend exceeds $100,000 (about Rs 43.5 lakh) in a calendar year.

"In case the aggregate forex utilisation by the IDC holders exceeds $100,000 in a calendar year, the statement should reach the foreign exchange department external payments division, on or before January 20 of the succeeding year," said an RBI notification.

Industry sources interpreted this as a move to keep a tab on any attempt of money laundering.

If this amounts to tightening of norms at the bank level, in a parallel move, the RBI has relaxed norms permitting banks to issue store value card/charge card/smart card without prior approval of the central bank.

Banks like ICICI Bank, HDFC Bank, IDBI Bank, UTI Bank, select foreign banks and State Bank India (SBI) issue travel cards and store value cards.

"Given the business opportunity and competition in the store value cards, smart cards and charge cards recently the RBI has been flooded with application for introduction of cards products," said banking sources.

Considering the number of application the RBI has liberalised this business segment, he added. There are over 30 million debit cards in circulation, with an annual growth of over 76 per cent, said a Visa and NCAER study.

The RBI also today also clarified that banks should not permit usage of IDCs on internet for purchase of prohibited items like lottery tickets, banned or proscribed magazines, participation in sweepstakes, payment for call-back services and for items/activities for which withdrawal of foreign exchange is not permitted.

Recently, banks have introduced selective payments like premium and utility bill payments through the debit cards via the Internet said a banker.

With the RBI enforcing banks to keep track of debit cardholders' transactions, "banks will now have to install software to track spends on the cards," said a senior private sector banker.

However, not too many customers spend that kind money through the IDC, he added, citing the average to be around Rs 150,000 annually, as most prefer using a credit card than a debit card.

Debit and credit card volumes also increased from $1 billion to an estimated $23 billion in 2004. However, 80 per cent of card volumes comes from automated teller machine cash withdrawals predominantly with debit cards, said the Visa & NCAER study.

Freeing of approval requirements meanwhile will see many hot offers in the market place as competition is expected to intensify, with customers benefitting by way of better pricing, said a senior banker.