RBI lifts restrictions on Mastercard: Explaining why the company was not allowed to add new customers in India

“There are some things money can’t buy. For everything else, there’s Mastercard.”

New customers in India will finally get to utter the global payment processor’s famous tagline after the Reserve Bank of India (RBI) lifted restrictions imposed last year on Mastercard and allowed the firm to add new customers for debit, credit or prepaid cards in India.

RBI lifts restrictions on Mastercard Asia: Central bank statement

— Press Trust of India (@PTI_News) June 16, 2022

The central bank said in a statement, “In view of the satisfactory compliance demonstrated by Mastercard Asia / Pacific Pte Ltd with the Reserve Bank of India… on Storage of Payment System Data, the restrictions imposed… on on-boarding of new domestic customers have been lifted with immediate effect.”

Reacting to the news, Mastercard said: “We welcome and are grateful for today’s decision by the Reserve Bank of India, enabling us to resume on-boarding of new domestic customers (debit, credit and prepaid) onto our card network in the country, with immediate effect. As we have in our engagement with the RBI, we reaffirm our commitment to support the digital needs of India, its people and its businesses.”

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We examine why the RBI had imposed restrictions on Mastercard and what had gone wrong in July 2021.

Banned in 2021

In July of last year, the RBI had indefinitely barred Mastercard from issuing new debit or credit cards to domestic customers for violating data storage rules.

The move was a big hit to the United States-based company, which had earlier commanded roughly 33 per cent market share in India.

The central bank said Mastercard had not complied with rules requiring foreign card networks to store data on Indian payments exclusively in India.

“Notwithstanding (the) lapse of considerable time and adequate opportunities being given, the entity (Mastercard) has been found to be non-compliant with the directions of Storage Payment System Data,” the RBI had said in a notification.

In 2019, the RBI had come up with the Storage Payment System Data and mandated that for all banks and service providers to store all the data relating to payment systems in India.

The RBI had then said that this would “ensure better monitoring and would provide them with unfettered supervisory access to data stored with these system providers as also with their service providers/intermediaries/third party vendors and other entities in the payment ecosystem”.

As per the guidelines, all system providers had to store all the data relating to payment systems in India. For the foreign leg of the transaction, if any, the data could also be stored abroad, if required.

The data stored in India should include end-to-end transaction details and information about payment transactions. It should also have customer data like name, mobile number, Aadhaar number, PAN.

Moreover, all data related to payments must be stored only in India and data processed (in case the processing is done abroad) will have to be brought back to the country within 24 hours.

The RBI also stated that the service providers would be required to report compliance and submit a board-approved system audit report conducted by a CERT-In empanelled auditor within the timelines specified therein.

Mastercard had then expressed its disappointment and said that it would continue working in resolving the issues. It added that the restrictions would have no impact to their existing users in the country.

RBI’s crackdown

The RBI’s action against Mastercard wasn’t the first time that such restrictions had been imposed.

In April, the central bank had placed similar restrictions on global card networking giants American Express Banking Corp and Diners Club International Ltd.

The RBI had restricted them from adding new customers in India from 1 May and continues to be in place till date. However, they are permitted to continue to serve their existing customer base.

With inputs from agencies

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