India’s restrictions on MasterCard could affect the bank’s card operations

The decision to ban MasterCard for non-compliance with data storage regulations has destabilized India’s financial sector. This will disrupt bank card offers and affect revenue, payments and executives in the banking industry. The central bank’s order took similar action against American Express in April. However, MasterCard is a major player in the Indian market, with many providers delivering cards using US firm payment networks.

A Reuters analysis of online card lists of 11 domestic and foreign banks in India found that MasterCard accounted for about one-third of the nearly 100 debit cards offered. At the same time, more than 75 credit card variants have used its network.

The Reserve Bank of India (RBI) has said that the issuance of such cards will be stopped from July 22 as MasterCard 2018 has not complied with the rules. In which foreign card networks are required to store Indian payment data locally for “blocked supervisor access”.

While existing customers will not be affected, the impact on business will be significant. Banks will then have to sign new commercial agreements with rival networks such as Visa. This is a process that could take months and weeks to integrate into back-end technology, five payment and banking executives said.

A banking official said it could take up to five months to switch to a visa. With the banning of American Express and MasterCard, Visa will have an unprecedented advantage in negotiating the already affected credit card market. One of the motivations, says a senior Indian banker, is “this will mean temporary disruption for banks, very busy negotiations and short-term business losses.”

The RBI’s 2018 rules were adopted despite aggressive lobbying by U.S. agencies trying to make them easier. MasterCard said it was “disappointed” with the decision and would work to address these concerns. “This is consistent with our significant and continued investment among our customers and partners in India to advance the government’s Digital India Vision,” MasterCard said in a statement on Thursday.

The decision comes as a big push for MasterCard, which sees India as a major market. After investing 1 1 billion (approximately Rs 7,450 crore) from 2014 to 2019, MasterCard said it was “in a hurry” to invest বিল 1 billion (about Rs 7,450 crore) in five years.

MasterCard has research and technology centers in India, with a capacity of 4,000 people, the second largest after the United States, up from 29 in 2013. With the proliferation of digital payments, Indians’ use of credit and debit cards has increased. RBI data shows that there were more than 62 million credit cards and about 902 million debit cards in India in May. By which $ 40.4 billion (approximately 3,01,120 crore) transactions were made simultaneously.

Sources said the delay in transferring visas has affected bank charges and other income from their card business. Some banks, such as RBL of India, list 42 credit cards on their website. All of these use the MasterCard network, while Yes Bank lists 7 cards using MasterCard. Four MasterCard credit cards are available on Citibank’s website.

RBL said in a statement on Thursday that it had entered into an agreement with Visa for credit cards following the RBI’s order, but that the consolidation would take 10 weeks. RBL said it has a five percent share of the credit card market. However, issuing 1 million new cards every month could potentially be detrimental. Its share has fallen by more than a percentage compared to the initial trade. RBL, Yes Bank, and Citibank did not immediately respond to requests for comment.

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