Master Card’s non-compliance with the guidelines of ‘Storage of Payment System Data’, India’s central bank, Reserve Bank of India bans Mastercard from issuing new debit and credit cards to the customers. Payment Data System gives the direction to maintain and store all the records of the payments, made by the domestic customers, in India, which Mastercard flunked to follow. RBI said, “Mastercard shall advise all card-issuing banks and non-banks to conform to these directions,” Further RBI said, “Notwithstanding the lapse of considerable time and adequate opportunities being given, the entity is non-compliant with the directions on Storage of Payment System Data,”.
RBI, on April 5th, 2018, disclosed a statement regarding ‘Storage on Payments System Data’ and Developmental and Regulatory Policies. The decision was made in an emergency and it was the need of the hour and disclosure was done without consulting the stakeholders. On April 6th, 2018, RBI broadcasted an announcement that said, “All system providers shall ensure that the entire data relating to payment systems operated by them be stored in a system only in India. This data should include the full end-to-end transaction details/information collected/carried/processed as part of the message/payment instruction. For the foreign leg of the transaction, if any, data can also be stored in the foreign country, if required.”
The ban on MasterCard may have an impact on a few private banks which may be felt just for a few months as they will be switching to another network of cards. Kimura Research said that the most impacted banks are Bajaj Finserv, YES Bank, and RBL Bank, as all their credit card schemes are completely associated with Mastercard. Nomura Research has released a table that shows a list of private banks and share of payment providers in the bank’s credit card schemes. The table shows YES bank, RBL bank, and Bajaj Finserv as the three banks which are wholly associated with MasterCard, and some of them like IndusInd bank, HDFC bank, Axis, and ICICI bank have 35-40% of their credit card scheme tied up with Mastercard.
RBI banned 3rd payment system operator. It has also banned two of the operators for noncompliance earlier in May, Discover Financial Services’ Diners Club card and AmericanExpressBankingCorp; restrictions came into effect from May 1st. MasterCard has been a major operator of Payment Systems which is banned by RBI, but the ban which has been assessed will not affect the existing customers, it has been restricted from signing on the new customers. RBI said, “The Reserve Bank of India (RBI) has today imposed restrictions on Mastercard Asia/Pacific Pte. Ltd. (Mastercard) from onboarding new domestic customers (debit, credit or prepaid) onto its card network from July 22, 2021,” The restriction on Mastercard has already come into effect.
Although the banks which provided credit card schemes through Mastercard are switching to another network, the only issue of concern for them is after the ban, VISA cards will enjoy a monopoly on issuing credit cards. RuPay is only allied to the market of debit cards.