IAS Gyan

Daily News Analysis


29th December, 2021 Economy


Figure 4: No Copyright Infringement Intended


  • The Reserve Bank of India hasextended the implementation date of card-on-file (CoF) tokenisation norms by six months to June 30, 2022.

RBI Circular:

  • In September 2021, the RBI prohibited merchants from storing customer card details on their servers with effect from January 01, 2022,
  • It mandated the adoption of card-on-file (CoF) tokenisation as an alternative to card storage.
  • It applies to domestic, online purchases.


About Tokenisation:

  • Tokenisation refers to replacement of actual credit and debit card details with an alternate code called the “token”, which will be unique for a combination of card, token requestor and device.

Process After tokenization:

  • A tokenised card transaction is considered safer as the actual card details are not shared with the merchant during transaction processing.
  • Customers who do not have the tokenisation facility will have to key in their name, 16-digit card number, expiry date and CVV each time they order something online.

Impact of Guidelines:

  • India has an estimated 100 crore debit and credit cards, which are used for about 1.5 crore daily transactions worth Rs 4000 crore, according to CII data.
  • Digital payments have triggered and sustained economic growth, especially through the trying times of the pandemic.
  • Online merchants can lose up to 20-40% of their revenues post 31 December due to tokenisation norms, and for many of them, especially smaller ones, this would sound the death knell, causing them to shut shop.

Consumer Impact:

  • An estimated 5 million customers, who have stored their card details for online transactions on various platforms, could be impacted if the online players and merchants are not able to implement the changes at their backend. 
  • E-commerce platforms, online service providers and small merchants could be especially hit.
  • Equated monthly instalments and subscription-based transactions that are paid through stored cards will also have to adhere to new rules. 
  • While 90 per cent of banks are ready for tokens on the Visa platform, Mastercard is yet to catch up.


Implementation of Tokenisation:

  • Three steps have to be completed for smooth implementation of tokenisation.

Token provisioning:

  • the consumer’s card number should be convertible into a token, which means the card networks have to be ready with the relevant infrastructure.

Token processing:

  • Consumers should be able to complete their transaction successfully through the tokens.

Scale-up for multiple use cases:

  • Consumer should be able to use the token for things like refunds, EMIs, recurring payments, offers, promotions, guest checkouts etc.