Explained: Why American Express was banned in India for 16 months

In a major relief to American Express Banking Corp (AmEx), the Reserve Bank of India (RBI) has lifted its ban on the non-bank credit card provider and has permitted it to add new domestic customers.The central bank said in its statement, “In view of the satisfactory compliance demonstrated by American Express Banking Corp with the Reserve Bank of India (RBI) circular dated 6 April, 2018 on Storage of Payment System Data, the restrictions imposed, vide order dated 23 April, 2021, on onboarding of new domestic customers have been lifted with immediate effect.”Commenting on the development, Sanjay Khanna - Interim CEO & COO, American Express Banking Corp, India was quoted as saying by ANI, “We welcome today’s decision by the Reserve Bank of India, which enables American Express Network to onboard new customers effective immediately. India is a key strategic market for American Express and today’s decision is the result of our significant local investments in technology, infrastructure, and resources.”We elaborate on why were the restrictions imposed on American Express Banking Corp.American Express Banking Corp is a multinational payment card services company that operates card networks in India under the Payment and Settlement Systems Act, 2007 (PSS Act).As per TechCrunch, American Express has the highest customer base in India among foreign banks with 1.5 million users.RBI put restrictions on AmEx in 2021On 23 April 2021, the RBI had halted American Express Banking Corp from onboarding new domestic customers from 1 May, 2021 for violating its circular on storage of payments data issued in 2018. The ban did not affect the existing customer base of AmEx.Following the setback, an AmEx spokesperson had said in a statement that they were “disappointed” with the RBI’s decision, adding that they are working to resolve the concerns “as quickly as possible”, TechCrunch reported.“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 had said.With restrictions finally lifted after 16 months, TechCrunch reports that Indian banks and fintechs will be able to offer customers American Express-powered credit cards. Over the last year, Visa and Rupay were majorly the only options for banks and fintechs.

Besides American Express, similar restrictions were imposed on Diners Club and Mastercard earlier.

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In June, RBI lifted restrictions on Mastercard. Firstpost[/caption]In June this year, the central bank rolled back the restrictions imposed on US-based Mastercard, allowing it to onboard new customers for debit, credit or prepaid cards in the country.The RBI’s move harshly penalised these American payment card service providers, thus reducing competition in the market.Diners Club, owned by Discover Financial Services, was allowed to add new customers from December last year. Diners Club, which is in partnership with HDFC, one of the leading private sector banks in India, provides credit card services to customers.What are India’s data storage rules? In 2018, the RBI came out with Storage Payment System Data which mandates all system providers to store their data relating to payment systems (full end-to-end transaction details, information collected, carried, processed as part of the message, payment instruction) only in India.Stating the need for the above rules, the RBI had said in its circular, “In order to ensure better monitoring, it is important to have unfettered supervisory access to data stored with these system providers as also with their service providers / intermediaries/ third party vendors and other entities in the payment ecosystem.”Moreover, the data stored in India should include customer data like name, mobile number, Aadhaar number, PAN as well as information about payment transactions.The system providers were directed to comply with the order latest by 15 October 2018. They were also asked to report compliance within six months of the order as well as submit a System Audit Report (SAR) conducted by a CERT-In empanelled auditor within the specified timelines.With inputs from agenciesRead all the Latest News, Trending News, Cricket News, Bollywood News,India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.