Indian central bank Reserve Bank has barred Mastercard from issuing new credit or debit cards to Indian customers due to non-compliance with the data localization norms.
The move by the RBI could have significant ramifications for international relations, since Mastercard is the second-largest card issuer in India after Visa. Since July 22, the central bank will not allow Mastercard to issue any new cards for domestic use. However, the move will not affect existing Mastercard card holders (credit, debit, or prepaid).
The Mumbai-based private sector bank, RBL Bank, has reportedly changed its credit card provider to Visa Inc due to the RBI’s announcement on July 15.
After American Express and Diners Club, MasterCard is the third US company banned by RBI, in violation of the data-localization rules in place in 2018.
Mastercard can No Longer Issue Fresh Cards From July 22
In 2018, the Reserve Bank of India issued the data storage or data localization norms. All regulated entities (foreign card channels) were mandated to save payment data related to Indian customers on Indian Ground.
American Express and Diners Club were prohibited from issuing new cards to Indian customers, starting May 1, due to non-compliance with data localization norms, announced the RBI in April 2021.
In a statement published, RBI has halted Mastercard from issuing new cards (credit, debit, or prepaid) for an Indian customer base, starting July 22, on the same account of non-compliance with RBI’s data storage rule.
While Mastercard is not the first US card network to be barred from expanding further in the Indian market, it has a massive userbase here.
MasterCard is the second largest card issuer in India after Visa. Furthermore, the Indian market houses the second largest number of employees for the business.
TOI reports that it has invested $1 billion in India and intends to invest $1 billion more.
Current Mastercard Users Need not Worry.
While announcing the inability of Mastercard to issue new cards in India for domestic use, starting July 22, RBI also clarified that the existing massive population of Indian cardholders using Mastercard need not worry as it will not affect them.
The U.S. Federal Reserve stated that it had given card issuers plenty of time and ample opportunities to comply with 2018 data storage rules. However, the entity failed to comply with the directions on data localization.
In response to RBI’s announcement, Mastercard said, “Since the RBI directive requiring on-soil storage of domestic payment transaction data was issued in 2018, we have provided consistent updates and reports regarding our activities and compliance with the requirements.”
It also stated that, although they were disappointed with the RBI’s decision (dated July 14), they will continue to work with the central bank to provide more information to resolve their concerns.