American Express, Diners Club face restrictions in India over data storage violations

By Sayujya S, Desk Reporter
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India’s central bank has restricted US-based financial services companies American Express and Diners Club from adding new customers starting next month, citing violation of local data-storage rules.

In a statement, the Reserve Bank of India (RBI) said existing customers of either of the two card companies will not be impacted by the new order, which goes into effect May 1.

Data storage rules

This is the first time India’s central bank has penalized any firm for noncompliance with local data-storage rules, which was unveiled in 2018. The rules require payments firms to store all Indian transaction data within servers in the country.

Visa and Mastercard, the two largest payment processing networks in the world, as well as the US government have previously requested the Indian government to reconsider its rules, which is designed to allow the regulator “unfettered supervisory access.”

Visa, Mastercard and American Express had also lobbied to either significantly change the rules or completely discard it. But after none of those efforts worked, most firms began to comply.

Following RBI’s decision, a spokesperson from American Express said the company was “disappointed that the RBI has this course of action,” but said it was working with the authority to resolve the concerns “as quickly as possible.”

With about 1.5 million customers, American Express has amassed the highest number of customers among foreign banks in India.

“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. 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,” the spokesperson added.

Diners Club gets hit too

Diners Club, which is owned by Discover Financial Services and offers credit cards in India through a partnership with the nation’s largest private sector bank HDFC, 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 that 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.

The latest order comes as Citigroup, another key foreign bank in India, has announced plans to exit most of its Asian consumer business as it looks to boost its profitability. The consumer operations of the bank in 13 countries is up for sale.

Related: Mastercard to acquire digital ID verification company Ekata amid demand boom