senior U.S. trade official privately criticised India’s July decision to ban Mastercard Inc from issuing new cards, calling it a “draconian” move that caused “panic”, consistent with U.S. government emails seen by Reuters. The documents show frustration within the U.S. government after India’s financial institution banned new card issuance by American Express and Diners Club International in April, then took similar action against Mastercard in July.
The Federal Reserve Bank of India accuses the businesses of breaking local data-storage rules. The bans don’t affect existing customers.
The ban on Mastercard – a top payment network in India alongside Visa – triggered a flurry of emails between U.S. officials in Washington and India as they discussed next steps with Mastercard, including approaching the RBI, the govt emails show.
“We’ve started hearing from stakeholders about some pretty draconian measures that the RBI has appropriated the past couple days,” Brendan A. Lynch, the deputy assistant U.S. trade representative for South and Central Asia, wrote on July 16, two days after the Mastercard announcement.
“It seems like some others (Amex, Diners) may are impacted by similar actions recently,” wrote Lynch, asking his colleagues in India to urge in-tuned with their financial institution contacts “to see what’s going on”.
Lynch, spokespeople for the Office of the U.S. Trade Representative and therefore the U.S. Embassy in New Delhi didn’t answer requests for comment. The U.S. government has not publicly commented on the Mastercard ban.
The RBI didn’t immediately respond.
A Mastercard spokesman told Reuters, “We’ve had very constructive engagements with the Indian and U.S. governments over the past few weeks and appreciate the support of both.” This includes discussions with the RBI, and Mastercard has “made good progress” because it looks to resolve things quickly, he said.
“PANIC”, “FULL COURT PRESS”
Mastercard counts India as a key growth market. In 2019 it said it had been “bullish on India”, a rustic where it’s made major investment bets and built research and technology centres.
The Mastercard ban rattled the corporate and upset India’s financial sector as Indian partner banks fear successful to their income as they struggle to swiftly partner with new networks to supply cards.
The RBI acted against Mastercard because it had been “found to be non-compliant” with the 2018 rules despite the “lapse of considerable time and adequate opportunities”.
The rules, requiring foreign card networks to store Indian payments data locally for “unfettered supervisory access”, were implemented after failed lobbying efforts of U.S. firms also soured trade ties between New Delhi and Washington.
Mastercard has said it had been “disappointed” with the choice . the corporate has told Reuters it had submitted a further audit report back to the RBI before the ban took effect on July 22.
In one, Lynch told colleagues the understanding was that “the RBI has info they have and are hopeful that they’re going to respond appropriately.” But because the ban approached, “if the RBI doesn’t jibe , I’m sure the panic will resume,” he wrote.
Days later, he wrote that Mastercard was continuing “to placed on the complete court press” in Washington.
