"As complaints related to misuse of debit or credit cards have jumped to 1,279 till June from 732 year ago, I have directed state-run and private banks to issue only chip-based ATM cards with photo of an individual customer to check their fraudulent use," Palanisamy said at the annual conference of the Reserve Bank of India's (RBI) regional office.

A photo-based debit or credit card will ensure that only an account holder, whose picture is stored in the system with his bank account, will be able make transactions like cash withdrawal after proper identification.

Noting that net banking frauds through internet by masking IP (internet protocol) address were also on the rise, Palanisamy said that there were about 3,466 complaints from customers of various banks last fiscal (2012-13) on loss of money due to fraudulent or failed transactions.

"Banks have to improve the second layer of authentication with better fire wall to secure their customers' accounts and prevent hacking or fraudulent withdrawals. Customers should also be intimated about cash withdrawals from their accounts through SMS so that they can know all transactions," the ombudsman said.

Absence of fool-proof security system allows fraudsters to hack into back accounts online or open accounts without observing the KYC (know your customer) norms of the central bank (RBI).

"Electronic fund transfer and real time gross settlement software, however, helped transfer of funds cheaper and faster across the banking system," Palanisamy added.


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