The Reserve Bank of India (RBI) prohibited Mastercard from adding new domestic debit, credit, or prepaid users to its card network. From July 22, Mastercard will no longer be able to issue new cards.
The decision was made due to the company's failure to comply with local data storage regulations. "Notwithstanding lapse of considerable time and adequate opportunities being given, the entity has been found to be non-compliant with the directions on Storage of Payment System Data".
Under the PSS Act, Mastercard is a Payment System Operator authorized to operate a Card Network in the country.
How will it impact existing customers?
Existing Mastercard customers will not be affected by this directive. All card-issuing banks and non-banks will be advised to follow these guidelines by Mastercard. Mastercard will no longer be able to issue new cards after July 22. However, it will be able to serve its existing customer.
The RBI used its authorities under Section 17 of the Payment and Settlement Systems Act, 2007 to take the supervisory action (PSS Act). The restriction is imposed on Mastercard Asia / Pacific Pte. Ltd from onboarding new domestic customers onto its card network from July 22, 2021.
According to the RBI circular on Payment System Storage, all system providers must ensure that the entire data relating to payment systems operated by them is stored in an Indian system within six months.
Mastercard is now the third major Payment System Operator to face restrictions as a result of the RBI's directive on Payment System Data Storage. For violating data storage requirements, the RBI already barred American Express Banking Corp and Diners Club International Ltd from onboarding new domestic consumers on their card networks as of May 1.