Indian officials moved to ban Mastercard from accepting new customers in the country after the company allegedly violated the nation's data storage regulations.
Mastercard will not be allowed to issue new debit, credit, or prepaid cards starting next Thursday, the Reserve Bank of India (RBI). The agency did not reveal, however, how long the financial service company would be restricted for.
Data Storage Violation
The central bank issued a statement on Wednesday where it said that Mastercard (MA) was given "considerable time and adequate opportunities" to address the issue with a 2018 mandate. The measure required all payment providers to use locally based servers when storing data on Indian users and transactions. Authorities gave some companies six months to comply with the new legislation.
When asked why the decision to ban Mastercard was only happening now, the RBI did not immediately provide an answer. The agency said in its Wednesday order that Mastercard would have to direct all card-issuing banks "to conform" to the mandate. Despite this order, existing customers of the company would not be affected. Mastercard did not respond to questions of how many users it currently has in India, CNN reported.
However, the company said that its current operations in the country were not affected by the new restrictions. Officials added that Mastercard was fully committed to following the legal and regulatory obligations within the region they are operating in. The company said it was coordinating with the central bank in the last three years to comply with the requirements.
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Mastercard accounted for 33% of all card payments in India, PPRO, a London-based payments start-up, said. The firm announced a massive billion-dollar investment in the five years starting from 2019 to fund future expansions in the country, BBC reported.
Company officials said that while the result of the decision was disappointing, they are still working with Indian authorities to resolve the concerns. The ban on Mastercard is not the first time that Indian authorities have issued similar restrictions.
Restrictions on Mastercard
The RBI implemented restrictions on American Express (AXP) in April regarding the same issue of data storage violations. At the time, American Express said it had been in constant communication with Indian officials and showed their progress in complying with the regulation.
However, the major difference between the two issues is that Mastercard has already been partnered with many Indian banks that offer cards using the company's payments network. The decision also comes as many local competitors such as Rupay have become increasingly supported by Prime Minister Narendra Modi.
In 2018, Mastercard officials argued that New Delhi's protectionist policies were hindering foreign payment companies from conducting operations within the region, Reuters reported.
Data privacy concerns are on the rise worldwide, such as China's action against electric vehicle manufacturer Tesla (TSLA). A new facility set up in the Asian country is under criticism for allegedly using its vehicles to spy within the nation.
Didi, a Chinese vehicle for hire company, is also under attack by Chinese officials with allegations of mishandling sensitive data information about its users in the country.
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