India to ban new Mastercards in row over customer data

India’s central bank has already barred American Express and Diners Club International from issuing new cards

File: Mastercard credit cards seen in a picture taken on 8 December 2017 (Reuters)

India’s central bank has barred Mastercard from bringing any new domestic customers onto its network from 22 July for violating data storage rules.

It has been blocked from issuing debit, credit or prepaid cards to customers in India.

In a statement, the Reserve Bank of India said: “Notwithstanding lapse of considerable time and adequate opportunities being given, the entity (Mastercard) has been found to be non-compliant with the directions on storage of payment system data.”

In 2018, the RBI had directed all payment system providers to ensure that within a period of six months their payments data is stored in a system in India.

The central bank said the new order will not impact existing Mastercard customers. The payments service provider has been asked to advise all card-issuing banks and non-banks to conform to these new directions.

Mastercard said it had been providing regular updates since 2018 about its compliance with the rules. While the company said it was disappointed with the RBI’s decision, it said it will continue to work with the central bank to provide any additional details required to resolve their concerns.

Mastercard is the third entity to be barred by India on these grounds. RBI had told American Express and Diners Club International in April this year not to get new domestic customers from 1 May due to similar violations.

The US companies attempted in 2018 to get the RBI directives diluted, requesting that they be allowed to store data both locally and at their offshore offices. But their requests were declined.

Banking industry executives told news agency Reuters that the decision to ban Mastercard will affect banks’ card operations because they will need to sign new deals with rival networks such as Visa.

This process could take as long as five months and Visa will be in a stronger position to negotiate, with both American Express and Mastercard barred in India, a banking executive told Reuters.

Mastercard accounted for 33 per cent of all card payments in India last year, news agency AFP said, citing a London-based payments startup PPRO Financial.

India's RBL Bank said on Thursday that it has entered into an agreement with Visa to issue credit cards. It said it expects to start issuing credit cards on the Visa payment network after the technology integration which is expected to take 8-10 weeks.

RBL has approximately 3 million credit card customers and is the fifth largest credit card issuer in India with a market share of 5 per cent, it said in a statement.