For one, the central bank has decided not to allow cash withdrawals on smart cards except at bank branches and ATMs. Smart cards can be used for all three kinds of payment transactions - credit, debit and cash. "Although it is permitted abroad, we have decided to limit it to specific points here," P V Subba Rao, chief general manager, Department of Banking Operations and Development said. A circular to this effect would be sent to banks in around three days. The other aspects to be covered in the circular include customers eligible for issue of debit/smart cards, do's and don'ts, transaction entry and settlement issues. "Based on this, individual banks can set theirown parameters," Rao said.

The final document to facilitate smart card based transactions is expected by December, said RBI executive director A Vasudevan. This would deal with specifications for smart cards to ensure they are in line with international standards. The standards will be issued by the Bureau of Indian Standards.

The RBI working group headed by Vasudevan is currently evaluating these standards. "We are ready. The draft now needs to be discussed with D B Phatak (head of the Kanwal Reikhi School of Information Technology) before being finalised," Vasudevan said. The original draft for the standards was submitted to RBI in August this year after a pilot initiated by the Institute for Development and Research in Banking Technology (IDRBT) and conducted by the Indian Institute of Technology, Mumbai. The project had 16 partners comprising card and terminal manufacturers, and software solution providers including leading smart card vendor Verifone, HCL and Aplab.

Pre-authorised debit is expectedto be the most popular form of smart card use. For pre-authorised debit transactions, the card is loaded with the desired amount at a bank and every time a purchase is made the value of goods is deducted from the card. Merchants need to have a smart card terminal which reads the pin number and is also capable of storing transaction data. Transactions are sent to individual banks at the end of the day and inter-bank settlement are done by a settlement agency.

Commenting on smart cards, Saraswathi Krithivasan, Smart Card Rupee System project manager at IIT said, "The vendors have nothing to do with it. It depends on how fast banks can ready themselves."