RBI allows Mastercard to add new customers again

Mumbai: The Reserve Bank of India (RBI) has lifted the ban on Mastercard from onboarding new customers. The payment giant was barred from issuing fresh cards on July 14, 2021 for non-compliance with RBI’s regulations on localised storage of payment system data.

“In view of the satisfactory compliance demonstrated by Mastercard Asia-Pacific with the RBI circular, the restrictions imposed vide order dated July 14, 2021 on onboarding of new domestic customers have been lifted with immediate effect,” the central bank said in a statement.

Last year, following the imposition of the ban, a few banks that had an exclusive arrangement with Mastercard for credit card issuance switched to Visa. One of these was RBL Bank, which has issued 30 lakh cards in partnership with Bajaj Finserv. Yes Bank too had an exclusive arrangement with Mastercard. Some of these banks will likely revert to their original agreement with Mastercard.

Sources said that Mastercard was already in the process of localising data storage. However, the delay in achieving compliance forced the RBI to take a tough stand. Mastercard is India’s second-largest credit card issuer, and it has made large investments in payment infrastructure.

Sources said that the company was lobbying for relaxation in the storage norms and sought a dispensation which would accept ‘storage in India’ rather than ‘storage only in India’. However, the RBI insisted that customer data, if sent overseas for processing, should be deleted by the end of the day.

Mastercard was the third US company to face an RBI ban after American Express and Diners Club faced similar restrictions in April. Amex has said that while it is not accepting fresh applications, it is committed to complying with all regulations.

Diners Club has since complied and the RBI lifted the restrictions in November 2021. Banks that were exclusively issuing Mastercard instruments took nearly two months to finalise new rushed agreements with Mastercard’s rival Visa. In the last 12 months, Visa has consolidated its position as the largest credit card network in the country. Although RuPay is a leader in the debit card segment, in terms of value, most card payments take place on Visa’s credit card platform.