RBI prohibits Mastercard from on-boarding new customers

The Reserve Bank of India (RBI) prohibited Mastercard Asia from on-boarding any new domestic customers onto its network on Wednesday. The central bank clarified in a statement that the action was taken because Mastercard failed to comply with its directions on the storage of payment system data.

After American Express Banking Corp. and Diners Club International Ltd., MasterCard has now become the third major payment system operator to face such restrictions. On May 1st of this year, similar restrictions were imposed on the other two Payment System Operators. According to the order, the restriction on Mastercard will take effect on July 22.

‘Despite the lapse of considerable time and adequate opportunities, it has been found that the entity has failed to comply with the directions on the storage of payment system data,’ said a press release issued by the RBI. The RBI clarified that its order will not affect existing Mastercard customers in a press release. In an official statement, the RBI said, Mastercard will inform all banks that issue cards and non-bank organizations with regard to these guidelines. The supervisory action was taken in exercising powers vested in the RBI under Section 17 of the Payment and Settlement Systems Act, 2007 (PSS Act). As per the RBI’s Payment and Settlement Systems Act, 2007, Mastercard is authorized to operate a card network.

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Mastercard is restricted, why?
According to the RBI’s circular on ‘storage of payment system data’ dated April 6, 2018, all payment system providers are to ensure that the entire data relating to their payment systems is stored only in India. Among other details, the data in question included full end-to-end transaction details, customer information, and payment instructions. The RBI had given payment system operators six months to comply with the circular. Mastercard was also asked to submit a Board-approved System Audit Report, conducted by a CERT-In empanelled auditor, to the RBI.