Reserve Bank of India bans Mastercard from adding new customers

The Reserve Bank of India has indefinitely barred financial services corporation, Mastercard, from issuing new debit, credit, or prepaid cards to its customers in the South Asian market. The reason stated is noncompliance by the company with local data storage rules.

The central bank said the new restrictions will be in effect on July 22.  “Notwithstanding the lapse of considerable time and adequate opportunities being given, the entity has been found to be non-compliant with the directions on Storage of Payment System Data,” RBI said in a statement Wednesday.

RBI clarified that the new order will have no impact on the existing customer base of Mastercard, which happens to one of the top three card issuers in India.  “Mastercard shall advise all card-issuing banks and non-banks to conform to these directions,” it said.

The central bank’s penalization of Mastercard is not the first instance of punitive measures being adopted over noncompliance with local data-storage rules, which was introduced in 2018 and mandated compliance within six months. According to the rule, payment firms are required to store all Indian transaction data within servers in the country.

Prior to this incident, the RBI in April issues restrictions on American Express and Diners Club preventing them from adding new customers, citing breach of the same rules.

A reconsideration of the new rules has been requested on multiple occasions by different parties including Visa, Mastercard, and also the U.S. government. All parties have argued that the rule is designed to allow the regulator “unfettered supervisory access.”