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RBI bans AmEx, Diners Club from issuing new cards for violating data rules

MUMBAI (Reuters) - The Reserve Bank of India (RBI) on Friday banned American Express Co and Diners Club International, owned by Discover Financial Services, from issuing new cards to domestic customers after they violated data storage rules.

A security guard's reflection is seen next to the logo of the Reserve Bank Of India (RBI) at the RBI headquarters in Mumbai, India, June 6, 2019. REUTERS/Francis Mascarenhas/Files

Both companies will be restricted from adding new customers to their card networks from May 1 as they “have been found non-compliant” with local data storage rules, the central bank said in a statement.

Since October 2018, companies like Mastercard, Visa and American Express have had to store their Indian payments data locally so the regulator can have “unfettered supervisory access”.

The directive sparked an aggressive, but unsuccessful, lobbying effort from the U.S. companies which said the rules would increase their infrastructure costs, hit their global fraud detection platforms and affect planned investments in India where more and more people are using digital modes of payments.

American Express said in a statement it has been in regular dialogue with the RBI about data localisation requirements and has demonstrated progress towards complying with the rules.

“While we’re disappointed that the RBI has taken this course of action, we are working with them to resolve their concerns as quickly as possible,” it said, adding that existing customers would not be affected.

Discover also said the order would not impact existing Diners Club cardholders in the region, and it was working closely with its local partners and the central bank.

“India remains an important market and we look forward to a resolution that allows us to continue to grow in the country,” it said.

American Express had more than 1.5 million cards in circulation locally as of February, according to central bank data. However, an industry source with direct knowledge said the financial impact of the ruling could be limited as India makes up only “a very small” percentage of the company’s global business.

While data for Diners Club was not immediately available, the card network has a tie up with HDFC Bank that has the largest share of India’s credit card market.

The central bank in December 2020 stopped HDFC, India’s largest private lender, from adding new credit card customers or launching digital businesses after its digital payment services were hit by a power failure.

Additional reporting by Aditya Kalra in New Delhi, writing by Aditi Shah; Editing by Kirsten Donovan