India’s RBI bans American Express, Diners Club from on-boarding new customers

The Reserve Bank of India (RBI) banned American Express Banking and Diners Club International from adding new customers, citing non-compliance with data-storage rules.

The order will take effect May 1 and won’t impact existing customers, the RBI said in a statement.

American Express Banking Corp and Diners Club International Ltd are Payment System Operators authorised to operate card networks in the country under the Payment and Settlement Systems Act, 2007 (PSS Act), the RBI said.

“These entities have been found non-compliant with the directions on Storage of Payment System Data,” the RBI said. The supervisory action, it added, has been taken in exercise of powers vested in RBI under the PSS Act.

The firms are the first to be penalised under India’s data-storage rules announced 2018, which ordered payment systems providers to store all data generated by them on servers in India. They were required to report compliance to RBI and submit a board-approved System Audit Report (SAR) conducted by a CERT-in empanelled auditor within the specified timeline.

RBI had issued a circular in April 2018 on Storage of Payment System Data, directing all payment system providers to ensure that within a period of six months the entire data including end-to-end transaction details, information collected, carried, processed as part of the message or payment instruction, relating to payment systems operated by them is stored in a system only in India.

In response to the new ruling, American Express issued a statement which said, “We have been in regular dialogue with the Reserve Bank of India about data localization requirements and have demonstrated our progress towards complying with the regulation. 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. This does not impact the services that we offer to our existing customers in India, and our customers can continue to use and accept our cards as normal.”

Diners Club, which is owned by Discover Financial Services and offers credit cards in India said in a statement that India remains an important market for the firm and it is working with the central bank to reach a resolution so it can “continue to grow in the country.”

Last year, India’s central bank ordered HDFC Bank to not add new credit customers or launch digital businesses after the bank’s services were hit by a power outage.

This order comes as Citigroup, another foreign bank in India, planned to exit most of its Asian consumer business.

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