Mastercard banned in India: The Reserve Bank of India (RBI) on Wednesday, July 14, barred Mastercard from on-boarding new domestic customers includig debit, credit or prepaid cards users onto its network. The ban will come into effect from July 22.
Mastercard shall advise all card-issuing banks and non-banks to conform to these directions. The supervisory action has been taken in the exercise of powers vested in RBI under Section 17 of the Payment and Settlement Systems Act, 2007 (PSS Act).
However, RBI’s ban on Mastercard in India has raised several questions about Mastercard’s existing customers. Although the national bank has mentioned in its order that it will not impact existing users of Mastercard, many questions remain to be answered. Here’s everything you want to know about the Mastercard post-RBI’s ban.
Why did RBI ban Mastercard?
Mastercard is a Payment System Operator authorised to operate a Card Network in the country under the PSS Act.
In terms of the RBI circular on Storage of Payment System Data dated April 6, 2018, all System Providers were directed to ensure that within a period of six months the entire data (full end-to-end transaction details/ information collected/ carried /processed as part of the message/payment instruction) relating to payment systems operated by them is stored in a system only in India.
Also, they were 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 Asia/ Pacific Pte Ltd (Mastercard) was found to be in violation of these guidelines. “Notwithstanding the lapse of considerable time and adequate opportunities being given, the entity has been found to be non-compliant with the directions on Storage of Payment System Data,” the central bank said.
What does it mean for banks?
Citing the violation of norms on storage of payment systems data, the Reserve Bank of India has prohibited Mastercard from issuing debit cards, credit cards or prepaid cards to new customers, starting from July 22.
Several private-sector lenders like HDFC Bank, Yes Bank, ICICI Bank, RBL Bank have tie-ups Mastercard for debit and credit cards. However, from July 22, no banks will be able to issue new cards on the Mastercard network anymore.
“Mastercard shall advise all card-issuing banks and non-banks to conform to these directions,” it added.
Meanwhile, following the order, RBL Bank said in a regulatory filing, “We await further information from Mastercard on RBI’s supervisory action. RBL Bank currently issues credit cards on the Mastercard network only.”
What will happen to existing customers?
Mastercard is a Payment System Operator authorised to operate a card network in the country under the Payment and Settlement Systems Act, 2007 (PSS Act). According to data released by PPRO, Mastercard accounted for over 30 per cent of all card payments in India.
For not complying with norms, the central bank barred Mastercard and asked to advise all card-issuing banks and non-banks to conform to its directions.
However, RBI also clarified “this order will not impact existing customers of Mastercard”.
So, if you are using a debit or credit card or prepaid card from Mastercard, you need not worry. The RBI’s order is only for new customer additions and not for existing Mastercard customers. The existing customers will be able to use all the services offered by the company as earlier without any changes.
“This order will not impact existing customers of Mastercard,” the banking regulator earlier mentioned. So the customers can use all the services on their Mastercard debit and credit cards and also prepaid cards without any changes.