These recommendations have been made in a report by a working group set up by RBI to increase the security of transactions where credit cards are present (unlike online transactions). The report suggests that an alternative to PIN could be a biometric verification of the cardholder’s identity using data from Aadhar - the project by the Unique Identification Authority of India.

The move is expected to bring down the level of credit card frauds. But it would increase costs for banks and could also increase the time taken in some retail transactions because of the additional level of security in the form of a PIN. Some card issuers and banks have been proactive on this front. SBI, ICICI Bank, Citibank and HDFC Bank for instance has started replacing plain magnetic swipe high-end cards with dual cards having both the chip and the magnetic swipe.

According to the report, one of the weaknesses of the magnetic swipe card is that it is susceptible to cloning. Fraudsters who get hold of a card are able to copy information in the magnetic strip and create an identical card. Such 'cloning' of cards is more of a problem for cardholders who travel internationally. Given the higher risk for cardholders who travel abroad, the panel has said that banks should first replace cards of those who have used their credit cards for at least one international transaction. These replacements need to be done within two years.

Secondly, all new and renewal card customers should be issued chip cards with PIN by the beginning of the third year. Besides, 70% of all cards should move to chip card and PIN by end of year four. The panel proposes that by the fifth year every credit card in India should be chip-based and the cardholder should possess a PIN.