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The Reserve Bank of India (RBI) restricts Mastercard from issuing new debit, credit cards in India from 22 July. The RBI order will not impact existing customers of Mastercard. The action has been against the payment system operator for violating RBI’s norms on the storage of payment systems data.

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The Reserve Bank of India (RBI) on Wednesday imposed restrictions on Mastercard Asia / Pacific Pte Ltd (Mastercard). Restrictions will stop Mastercard from onboarding new domestic debit, credit, or prepaid customers on its card network. The ban on Mastercard issuing new cards will come into effect from 22 July.

The order comes as firms such as Mastercard and Visa also face growing competition from domestic payments network Rupay. Rupay is an Indian Payments System Operator, which has been enjoying high promotion from PM Narendra Modi.

What are the reasons behind the ban?

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The action is taken against the payment system operator for violating RBI’s norms on the storage of payment systems data. RBI said in its official statement that 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.

The central bank also added that this order will not impact existing customers of Mastercard. Mastercard shall give its advisory to all card-issuing banks and non-banks to conform to these directions. RBI took the supervisory action while exercising the powers vested in RBI under Section 17 of the Payment and Settlement Systems Act, 2007 (PSS Act).

Mastercard is a Payment System Operator authorized to operate a Card Network in the country under the PSS Act. The PSS Act, 2007 provides for the regulation and supervision of payment systems in India. It designates the Reserve Bank of India as the authority for that purpose and all related matters. This act authorizes Reserve Bank to constitute a Committee of its Central Board known as the Board for Regulation and Supervision of Payment and Settlement Systems (BPSS). The committee will exercise its powers and perform its functions and discharge its duties under this statute.

The move comes less than three months after the RBI barred American Express and Diners Club International, owned by Discover Financial Services. Both the companies got restrictions from issuing new cards due to similar violations. Earlier, the central bank directive in 2018 sparked an aggressive lobbying effort from US firms. These rules would increase their infrastructure costs and hit their global fraud detection platforms. However, the RBI did not relent. For more such updates, keep watching this space!

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