The Reserve Bank of India on Thursday announced that it would once again allow banks to issue cards from the Mastercard network to new customers, a big relief for the giant payments firm. No Mastercard cards have been issued in India since last July to new customers; the central bank that month penalized the firm for not fully complying with an unusual mandate to store cardholders’ financial data exclusively in India.
We have reached out to Mastercard for comment.
The nearly one year ban was a huge setback for the firm, which deals with competition not just from Visa, as is the case in most countries, but also from Rupay, the National Payments Corporation of India-backed card network, a homegrown alternative to the two giant card networks.
Mastercard had pushed against the RBI’s 2018 data localisation directive, arguing that efforts to keep Indian financial data exclusively within the country would undermine cardholders’ security, as cross-border fraud would become harder to detect. But the RBI did not back away, sanctioning American Express as well as Diners Club International, both large alternative payment networks targeted at smaller groups of customers. Diners Club was allowed to recommence issuance in November, but AmEx remains barred.
Mastercard tried all it could to be on the good books of the government, which seemed hell bent on making an example out of international firms hesitant to comply with unusual regulations. In the Modi government’s first term, the company said, it had invested around a billion dollars into its operations here. From another $1 billion allocation, the firm said it planned on investing $350 million in a local processing center, its first outside the United States. The firm has said it generally earns a 0.12–0.15% cut of transaction volumes in India.
The long ban probably stings for Mastercard — with no new customers at a time when the Indian economy had what can generously be described as a recovery, transaction volume growth probably lagged behind competitors. And now, with wholesale inflation at record highs, being able to issue credit cards to new customers is not of much solace to it, even as Visa and Rupay were able to operate uninterrupted all year.
Supervisory action by the RBI can be unforgiving and swift. In March, the central bank imposed similar restrictions on Paytm Payments Bank, citing “certain material supervisory concerns” that came up when Deloitte was auditing the bank.