Explained: Why did RBI bar Mastercard from taking on new customers
- RBI has restricted Mastercard from taking on new domestic customers
- Similar restrictions have been issued on American Express and Diners Club
- The restrictions will not impact current users of these cards
The Reserve Bank of India barred Mastercard from onboarding new customers in India on July 14. This is after the RBI imposed restrictions on two other card companies, American Express and Diners Club, from taking in new customers earlier. The restrictions have been imposed over data storage issues in accordance with stipulations of India’s central bank.
Why the restrictions?
The RBI imposed restrictions on Mastercard, disallowing it from onboarding new customers from July 22, because the company did not comply with the RBI’s guidelines for storage of data in India. The RBI said that it had given Mastercard nearly three years to comply with the guidelines. American Express and Diners Club have also been barred from onboarding new customers for the same reason.
Will existing users be affected?
No, existing customers using credit and debit cards with these companies, will be able to continue using those. However, banks and non-banking finance companies that were planning to use these payment networks will not be able to enrol customers until the RBI lifts its restrictions.
What are the RBI’s guidelines on data storage?
According to the RBI’s circular on Storage of Payment System Data issued on April 6, 2018, all card system providers have been directed to store payment data in a system only in India. This includes complete end-to-end transaction details and information collected or processed as part of payment instructions.
Why have these firms not complied?
Payment firms like Visa and Mastercard currently store and process Indian transactions outside the country. Companies say that moving the systems to India will cost them millions. Further, the firms believe that complying to the Indian central bank’s rules will lead to similar demands from other countries.
What are the payment providers remaining?
The restrictions on the three companies currently leaves only Visa Inc and National Payments Corporation of India’s RuPay.