Tokenisation rules kick in from today, October 1, 2022: Here's all about new credit card safety rule

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New Delhi: On October 1, the Reserve Bank of India (RBI) will put into effect new regulations for credit and debit cards that establish tokenization terms, usage restrictions, interest rate recommendations, and one-time password requirements (OTP).

What is Tokenisation?

In digital transactions, this entails substituting an alternative code known as the "token" for the actual card details. Customers are protected by credit card tokens, which replace personal data with a series of numerical and alphabetic characters produced by algorithms.

Major corporations are prepared for tokenization, according to experts, while small vendors may initially find it difficult. "We can safely state that merchant level tokenization will prevent many scams in the long run," says Godkhindi, after everyone is in agreement with the regulation.

However, tokenization dramatically lowers the danger of data loss, particularly from third-party apps, according to Adhil Shetty, CEO of Bankbazaar, a financial technology company. Most systematic investment plans (SIP) and equated monthly installments (EMI) are connected to bank accounts and won't be affected. Such card-based payments won't process without tokenization.

One Time Password (OTP):

According to a new RBI regulation, the issuer of the card must have OTP-based consent in order to activate it if the cardholder hasn't activated it for more than 30 days after the date of issuance. The issuer must deactivate the account in seven working days without a fee if a customer declines a request to activate a card.

Credit card limit

Credit limits are set by banks through a process called underwriting, which takes into account things like income level, debt-to-income ratios, credit scores, and performance histories of credit cards.

Interest rate

It is necessary to specify the terms and circumstances for making credit card payments, including the minimum amount owed. Unpaid taxes, levies, and other charges "must not be capitalised for the purpose of charging or compounding interest," the RBI states.