RBI gets into the big brother act

Mumbai: The Reserve Bank of India (RBI) wants banks to keep an eye on international debit card (IDC) holders and report to it, if the aggregate spend exceeds $100,000 (about Rs43.5 lakh) in a calendar year. The move is seen by many as an attempt to check money laundering.

RBI has also sent a notice to banks which says, "In case the aggregate forex utilisation by international credit card holders exceeds $100,000 in a year, the statement should reach the foreign exchange department external payments division, on or before 20 January, of the next year."

Banker say in order to do this they will have to install software to track spends on the cards. They feel that that the average yearly spend on international debit cards in India is not large enough to warrant such surveillance. The per card average yearly expenditure through international debit cards is around Rs1.5 lakh, as most customers prefer using a credit card than a debit card.

Debit and credit card volumes increased from $ 1 billion to an estimated $ 23 billion in 2004. Moreover, debit cards have overtaken credit cards in numbers and there are over 30 million debit cards in circulation, with an annual growth of over 76 per cent, according to a Visa and NCAER (National Council of Applied Economic Research) study. However, 80 per cent of card volumes comes from automated teller machine (ATM) cash withdrawals predominantly with debit cards.

In a parallel development, RBI has relaxed norms and has permitted 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.