The Reserve Bank of India on Wednesday banned Mastercard Asia from onboarding new domestic customers to its card network for violating RBI instructions on storing payment system data.
In a press release, RBI called on all issuing and non-bank banks to comply with the new guidelines effective July 22. This order will not affect existing Mastercard customers, he said.
“Despite a considerable period of time and adequate opportunities being given, the entity was found not to comply with the instructions on the storage of payment system data,” he said.
In April 2018, RBI asked all system vendors to ensure that, within six months, all data related to the payment systems they operate is stored in one system only in India. They were also required to report compliance to RBI and submit a system audit report approved by the Board of Directors and performed by an auditor appointed by CERT within the time limits specified therein. The rationale for the regulation was to provide better oversight of authorized entities in the event of fraud or money laundering. From the start, many players have resisted this rule, saying that much of their processing is centralized and that it is not possible to restructure global operations. RBI then clarified that while the data can only be stored locally, it can be sent out within a day for processing, but must be deleted from offshore servers within 24 hours.
However, in April of this year, RBI had imposed restrictions on American Express Banking Corp. Payment system data.
Lately, the RBI has taken punitive action against banks and other entities for violating regulations. The central bank had banned the country’s largest private sector bank from selling credit cards after the bank witnessed repeated technology failures at the bank for two years.
In a Mint editorial on Wednesday, Deep Mukherjee, a risk management professional, noted that RBI had started imposing heavy penalties on banks than before. This is the case, for example, with the May circular when the RBI asked two large Indian private banks to pay fines ranging from ₹3 crores to ₹10 crore, the highest by the regulator.
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