Govt Bans Mastercard From Acquiring New Credit Card, Debit Card Customers: But Why?
On account of non-compliance with the data localization norms, the central bank Reserve Bank of India has barred the US-based payments company Mastercard from issuing new credit or debit cards for Indian customers, starting July 22.
Mastercard is the second largest card issuer in India, after Visa and this move by RBI could have some notable effects on foreign relations. While the central bank will not allow Mastercard to issue any new cards for domestic use from July 22, it has clarified that the move will have no effect whatsoever on the existing users of Mastercard cards (credit, debit or prepaid).
As a result of RBI’s announcement on July 15, the Mumbai-based private sector bank, RBL Bank has reportedly switched to sign up with Visa Inc on Thursday, as its credit card provider for future applicants.
Mastercard is the third US company after American Express and Diners Club that have been banned by RBI, in violation of the data-localisation norms put into place in 2018.
Mastercard can No Longer Issue Fresh Cards From July 22
In 2018, Reserve Bank of India issued the data storage or data localisation norms, as per which all regulated entities (foreign card networks) were mandated to store payment data related to Indian customers on Indian soil.
In April 2021, RBI had barred American Express and Diners Club from issuing new cards to Indian customers, starting May 1, on account of non-compliance with the data localisation norms.
In a statement released yesterday, RBI has prohibited Mastercard to issue new cards (credit, debit or prepaid) for 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 surely has an immense 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 company.
It has invested $1 billion in India and has announced working on investing $1 billion more in the country, states TOI.
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 huge population of Indian card holders using Mastercard, need not worry as it will have no effect on them.
RBI stated that it had given the card issuer considerable time and adequate opportunities to comply with the data storage rules of 2018, yet the entity did not comply with the directions of data localisation.
In response to RBI’s announcement, Mastercard said, “Since the issuance of the RBI directive requiring on-soil storage of domestic payment transaction data in 2018, we have provided consistent updates and reports regarding our activities and compliance with the required stipulations.”
It also added that while they were disappointed with RBI’s decision (dated July 14), they will continue to work with the central bank to provide additional information for resolving their concerns.