RBI bars Mastercard from issuing new card with effect from July 22

The Reserve Bank of India (RBI) has indefinitely barred the US-based Mastercard from issuing new credit, debit and prepaid cards with effect from July 22, 2021 due to its failure to comply with data storage norms. All system providers were directed, on April 2018, to ensure that within a period of six months the entire data relating to payment systems operated by them is stored in a system only in India.The RBI has indefinitely barred the US-based Mastercard from issuing new credit, debit and prepaid cards with effect from July 22.

As such, they were also required to report compliance to RBI and submit a Board-approved System Audit Report conducted by a CERT-In empanelled auditor within the timelines specified therein. However, Mastercard has been found to be non-compliant with the directions on Storage of Payment System Data.

Mastercard, in a statement, said it is fully committed to its legal and regulatory obligations in the markets the company operates in. “Since the issuance of the RBI directive requiring on-soil storage of domestic payment transaction in 2018, we have provided consistent updates and reports regarding our activities and compliance with required stipulations,” it said. “While we are disappointed with the stance taken by the RBI in their communication dated July 14, we will continue to work with them to provide any additional details required to resolve their concerns.”

RBI currently issues credit cards only  on Mastercard payment network and has approximately three million credit card customers. It is the fifth largest credit card issuer in the country with about 5% market share. However, analysts believe that the impact of this ban would be felt on the bank’s credit card spends in the current quarter. ICICI Securities Ltd, in a note, said if a particular Mastercard co-branded credit card has high contribution to the overall mix of a credit card player, it will have a higher impact on the issuer’s business growth.

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Moreover, it’s to be noted that the central bank has entered into an agreement with Visa to issue cards to its customers. “RBL Bank expects to start issuance of credit cards on the Visa payment network post the technology integration which is expected to take eight to 10 weeks,” it said. “In the interim, our bank’s current run rate of approx. 100,000 new credit card issuance per month could potentially be impacted till such time that there is clarity from the regulator on issuing new credit cards on the Mastercard network or till the technical integration with Visa is complete.”