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India Bans Mastercard from Adding New Customers

Reserve Bank of India has indefinitely barred Mastercard from issuing new debit, credit or prepaid cards to customers in the South Asian market over noncompliance with local data storage rules. The South Asian market’s central bank said the new restrictions will go into effect on July 22. The new order won’t impact existing customers of Mastercard, which is one of the top three card issuers in India.

RBI said in a statement Wednesday, “Notwithstanding lapse of considerable time and adequate opportunities being given, the entity has been found to be noncompliant with the directions on Storage of Payment System Data. Mastercard shall advise all card-issuing banks and non-banks to conform to these directions.”

Mastercard will be indefinitely blocked from issuing debit, credit or prepaid cards to customers in India from July 22. In 2019, Mastercard said it was “bullish on India”, announcing $1 billion in investment over the next five years, in addition to its earlier investment of $1 billion from 2014-2019.

This isn’t the first time India’s central bank has penalized a firm for noncompliance with local data-storage rules, which were unveiled in 2018 and mandated compliance within six months. The rules require payments firms to store all Indian transaction data within servers in the country.

In April, RBI restricted American Express and Diners Club from adding new customers, citing violation of the same rules. Visa, Mastercard and several other firms, as well as the U.S. government, have previously requested New Delhi reconsider its rules, which they have argued are designed to allow the regulator “unfettered supervisory access.”

As per Kazim Rizvi, founding director, The Dialogue, the RBI’s decision to restrict entities from onboarding customers is a crucial development to ensure that all payment system operators store or localise their end-to-end transaction data only in India.

Global payments card companies have faced increasing competition from India’s United Payments Interface (UPI) transactions that offer card-less and cashless payment options using phone numbers and QR codes. A record 2.8 billion UPI transactions worth some 5.5 trillion rupees ($73.8 billion) took place in June.

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