Senior US trade officials criticize India’s ban on Mastercard Inc from issuing new cards

The ban of Mastercard Inc from issuing new cards has been criticized privately by senior US trade officials naming it a “draconian” move that caused “panic.”

India’s July decision to ban Mastercard Inc from issuing new cards has been criticized privately by senior US trade officials naming it a “draconian” move that caused “panic” as per the sources of Reuters who have seen US government emails.

Frustration could be seen in the US government through the document after in April new card issuance by American Express and Diners Club International has been banned from central bank India, and soon after that in July, the same action was been taken against Mastercard. Whereas the Reserve Bank of India (RBI) blames the companies for not following the local data-storage rules, the ban will not affect existing customers.

The ban on Mastercard which is used to process payments between the banks of merchants and the card-issuing banks or credit unions of the purchasers is also a top payment network in India alongside Visa cards- payment cards that use the Visa network set off a rush of emails between US officials in Washington and India as it was being talked over next steps with Mastercard, including approaching the RBI, shows the government emails.

On July 16 Brendan A. Lynch, the deputy assistant US trade representative for South and Central Asia, wrote “We’ve started hearing from stakeholders about some pretty draconian measures that the RBI has taken over the past couple of days.” To see what is going on Lynch, wrote asking his colleagues in India to get in touch with their central bank contacts “It sounds like some others (Amex, Diners) may have been impacted by similar actions recently.”

India’s financial sector could be seen affected by the ban of Mastercard as Indian partner banks fear a hit to their income as they struggle to swiftly partner with new networks to offer cards. The action was been taken by RBI against Mastercard as it was “found to be non-compliant” with the 2018 rules despite the “lapse of considerable time and adequate opportunities”. Mastercard says that they have been informed by submitting an additional audit report to the RBI before the ban took effect on July 22.

“If the RBI doesn’t change course, I’m sure the panic will resume,” Lynch wrote. Mastercard was continuing “to put on the full-court press” in Washington he wrote after many days.

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