RBI’s Local Data Storage Rule: What Will Visa, Mastercard, Amex Do After October 15th?

RBI wants deadline of October 15th to be adhered strictly by all payment processing companies.

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RBI's strict data localisation laws comes into force from October 15th
RBI’s strict data localisation laws comes into force from October 15th (Image Source: Wikipedia)

Actually, no one knows what will happen after October 15th, when RBI’s data localization laws are implemented with full vigor for all payment companies.

As per reports coming in, 80% of the payment companies have agreed to comply with the rules, which makes it mandatory for all payment processing companies to store their data inside India.

But that 20 % of the companies, which manage 90% of the cashless payments in India, haven’t yet confirmed.

And these include major card payment companies like Visa, Mastercard and Amex.

What will RBI do if they don’t comply? Will they shut down their operations?

We try to find out.

RBI: We Need 100% Compliance Effective October 16th

In the month of April, Reserve Bank of India issued a notification, which stated that within 6 months, all payment processing companies will have to store their data inside India.

October 15th was the deadline provided to all such companies operating in India.

Now, October 15th deadline is coming near, and as per available reports, companies such as Microsoft, Google, Facebook, Whatsapp and others have agreed to the RBI rules, and have ensured that starting October 16th, all payment related data will be stored in India.

Initially, these companies were resisting the move, but now, they all have agreed to comply.

Card Companies: We Need Some More Time

Out of 80 payment companies, 64 have agreed to comply. But the remaining 16 are the biggest who haven’t yet agreed to comply.

Major card payment companies like Visa, Mastercard and Amex have not yet agreed to the local data storage rules, and have instead suggested data mirroring technique: Same data which is stored at their overseas location will be now mirrored back in India.

They have sought some extra time from RBI to make the ‘arrangement’, but RBI has flatly refused to grant the same. As per RBI. 6 months is enough time to make the arrangements in order to comply with the localized data storage laws.

RBI’s Suggestion Of An Alternative

Meanwhile RBI knows that chaos can ensue if these 20 % of the companies are not able to switch to local data storage mode.

Hence, RBI has suggested them to opt for an India’s based Cloud service provider, and transfer all data to these companies, for a temporary period, and then revert to their own data facility, when they have one.

But this is even more difficult, as these card processing companies must be having an enormous amount of data.

A senior executive with one of the payment processing companies said, “Data localisation would require them (card companies) to create a lot of processes, hire people, and employ higher resources. They will also have to manage the impact on their existing risk-management framework,”

The issue is so complicated, that some of the largest card processing companies had even asked US Treasury to intervene and convince RBI to relax the rules for them. But RBI is in no mood to backdown.

Initially, major card processing companies like Visa, Mastercard, Amex had assumed that RBI will extend the deadline or the penalty would be a slap on the wrist; but now, they really don’t know what will happen after October 15th.

We strongly believe that the services from Amex, Mastercard, Visa won’t be stopped after October 15th, and an alternative will be figured out. 

There has been no reaction from Mastercard, Visa or Amex on this matter.

We will keep you updated, as we receive more information.

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