India bars Mastercard from adding new customers over a data violation.

NEW DELHI — India on Wednesday barred Mastercard from adding new customers in the country over claims that it had violated the country’s data storage laws, a blow to the company in a market it was investing in heavily for expansion.

The Reserve Bank of India said Mastercard had not complied with a 2018 order to store data on local transactions only in India despite “considerable time and adequate opportunities” to do so. The ban on issuing cards to new customers will go into effect on July 22, the central bank said in a statement.

Mastercard said in a statement that it was “disappointed” by the government restriction, but the move would not affect its operations. It added that it had worked closely with the authorities to “ensure we comply with the requirements” of the 2018 directive. A company representative declined to elaborate on the bank’s decision.

“Mastercard is fully committed to our legal and regulatory obligations in the markets we operate in,” the statement said. “We will continue to work with them and provide any additional details needed to resolve their concerns.”

American Express and Diners Club also faced similar restrictions this spring, but they are significantly smaller players in the Indian market.

Mastercard accounted for 33 percent of card payments in India, second only to Visa, which had a 45 percent share, according to a 2020 study by PPRO, a London-based payments start-up. In 2019, Mastercard announced that it was investing $1 billion over five years to expand its presence in India, adding to the $1 billion it had already invested from 2014 to 2019.

As part of India’s push to better protect its data, the demand that end-to-end transaction details be stored only in India has caused complications for international payment processors. But India has resisted lobbying from the financial companies, which argued that the setting up of local data processing increased costs significantly and could set a precedent for other countries to do the same and potentially affect their fraud monitoring.

“I don’t think it is a case of that they are saying that we will not do it — there might be some delay and they may be in the process of doing it,” A.P. Hota, an online payments analyst who formerly led India’s National Payment Corporation, said about the latest restriction on Mastercard.

Mr. Hota said the top 50 banks in India have relationships with Mastercard, but also with Visa and Rupay, a local payment processor. Mastercard could control the damage if the ban was brief, but the blowback of extended restrictions could be harsh in a market in which Mastercard was investing heavily.

“There will be a significant impact,” he said. “Banks who have arrangements with Mastercard in a big way will have to think about alternatives.”

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