RBI restricts the Card Companies American Express Banking Corp and Diners Club International Ltd from onboarding new credit Card Customers from May 1. It came in view due to violation of data norms.
The Central Bank issued the statement on Friday citing that The order will not impact the existing customers of these two entities. Under the Payment and Settlement Systems Act, 2007 (PSS Act), these two entities are the Payment System Operators which are authorised to operate card networks in the country. By an order dated April 23,2021, The RBI has imposed the restrictions on American Express Banking Corp and Diners Club International. This supervisory action has been taken by the Central Bank in exercise of powers vested under the PSS Act.
All payment system providers were directed by the Central Government to ensure that within a period of six months the entire payment system related data operated by them to be stored in a system only in India. It included details relating to full end-to-end transaction, information collected / carried / processed as part of the message including instructions of payment.
They were also mandated to report compliance to the Central Bank and had to submit a board-approved System Audit Report (SAR) within the given timeline conducted by a CERT-In empanelled auditor.
This announcement comes as American Express is on the hunt for new customers which comes in view of its encouragment by lower-than-expected losses on its loans. Amex has the highest number of credit card customers in India after Citigroup Inc. as a foreign bank.
On the other hand, Diners Club International operates as a tie up in India with HDFC Bank which is India’s largest card issuer. The share of Diners Club in HDFC Bank’s total cards portfolio is not as significant.
To oppose the RBI’s data localisation guidelines, Giants like Amex, VISA, Mastercard, Paypal and even Google, Amazon and Microsoft along with other global banks had planned to form lobby groups.
“These entities have been found non-compliant with the directions on Storage of Payment System Data,” the RBI said. The Central Bank seems to be inflexible in its approach, forcing almost all of the payments companies to comply with its guidelines and therefore, store the data locally.