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A Smart card in wrong hands?

RBI Has Its Own Concerns over Use Of Smart Cards

The Economic Times, September 22, 2006

The Reserve Bank of India (RB) has expressed concern over use of smart cards, as these could compromise security. Raising this issue in his speech at Banknet India’s second international Bank Tech summit , RBI deputy governor V Leeladhar pointed out that a smart card could fall into wrong hands who would then have access to the digital signature within.

Mr Leeladhar said IT security was a serious challenge as despite repeated discussions on need for security, there have been cases of security breaches and consequent perpetuation of frauds.

In this context, the RBI deputy governor pointed out that smart cards having an in-built digital signature could result in frauds if used by unauthorised persons.

This called for a look at the entire chain of procedures and components of a bank’s system in a holistic manner so that they can ensure that security is all-pervasive across the entire chain of activities.

Incidentally, RBI’s technology arm, IDRBT, has announced plans to issue national smart cards to rural customers, in association with six banks, the postal departments and other intermediaries such as registered NGOs, few government agencies and other financial service entities.

The project also involves the Indian Institute of Technology, Mumbai, and is being funded by the ministry of information technology.

Speaking to the press at Banknet India’s second international Bank Tech summit , Arvind Sharma, director, Institute for Development and Research in Banking Technology (IDRBT), said, “The pilot project would be launched within the next six weeks and we plan to complete the roll-out by the end of November.

In the first phase, we are targeting to reach out to 20,000 customers and over a period of one year, we are aiming at opening five crore such accounts.”

The card would use biometrics and PIN-numbers to identify customers and will have a capacity to store data of the last ten transactions. Banks could even look at loading cash upto a certain limit on these cards, which could operate as savings or pre-paid accounts.

With the Central government laying increasing emphasis upon financial inclusion in the North-Eastern region, the IDRBT plans to launch the pilot project in the region and to begin with, the state of Mizoram.

The banks involved in this project include the State Bank of India, ICICI Bank, HDFC Bank, United Bank of India and Andhra Bank.

Mr Sharma explained that the primary motive behind this exercise was to lower the cost of transactions by minimising use of cash, have a consolidated infrastructure so that all banks benefit from the large scale economies and also, build a database of customer credentials.

These cards would be issued by one of these six banks and can be used even at ATMs of other banks within the group, merchant establishments and point-of-sale outlets.

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