Reserve Bank of India has recently advised that all cards should be chip based rather than containing the magnetic strips so as to prevent the alarming rise in frauds.

Chip based debit and credit cards are considered more secure as they come with some encrypted information. However RBI has insisted on putting an additional layer of security over and above the chip on all new credit as well as debit cards. This would be the requirement of a unique personal identification number (PIN) for every card.

The occurence of frauds has been mainly found to be at point of sale (POS) terminals.

In case all chip based cards come with PIN, then POS terminals would also need to be modified accordingly. Also transaction time is going to increase due to teh addition of the added security layer.

The transition from magnetic stripe based cards to the chip based ones has already been started by lenders like State Bank of India, ICICI Bank, Citibank and HDFC Bank.