India's MasterCard Ban A 'Draconian' Move, US Trade Official Said In Emails: Report

Lynch asked his colleagues in India to get in touch with their central bank contacts “to see what’s going on”.

(Representative Image/Getty)

New Delhi: Criticizing the decision made by India earlier in July to ban Mastercard Inc from issuing new cards, a senior US trade official has called it a “draconian” move that caused “panic”, according to the US government emails seen by Reuters.

“We’ve started hearing from stakeholders about some pretty draconian measures that the RBI has taken over the past couple days,” Brendan A Lynch, the deputy assistant US trade representative for South and Central Asia, wrote earlier on July 16.

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Lynch asked his colleagues in India to get in touch with their central bank contacts “to see what’s going on”.

“It sounds like some others (Amex, Diners) may have been impacted by similar actions recently," he wrote.

His views came two days after the Mastercard announcement. The US government has, however, not publicly commented on the Mastercard ban.

The ban on Mastercard, a top payment network in India alongside Visa, triggered a flurry of emails between the US officials in Washington and India as they discussed the next steps with Mastercard, including approaching the Reserve Bank of India (RBI), according to the government emails, Reuters reported.

“We’ve had very constructive engagements with the Indian and US governments over the past few weeks and appreciate the support of both,” a Mastercard spokesman told Reuters.

He said this includes discussions with the RBI and Mastercard has “made good progress” as it looks to resolve the situation quickly.

The RBI, which banned new card issuance by American Express and Diners Club International earlier in April, took similar action against Mastercard in July.

The RBI accuses the companies of breaking local data-storage rules. The bans, however, do not affect the existing customers.

The RBI acted against Mastercard because it was “found to be non-compliant” with the 2018 rules despite the “lapse of considerable time and adequate opportunities”, Reuters reported.

Stating that it was “disappointed” with the decision, Mastercard has told Reuters it had submitted an additional audit report to the RBI before the ban took effect on July 22.

Lynch told his colleagues the understanding was that “the RBI has info they need and are hopeful that they will respond appropriately”, Reuters reported.

“If the RBI doesn’t change course, I’m sure the panic will resume,” he wrote as the ban approached.

He then wrote days later that Mastercard was continuing “to put on the full court press” in Washington.

Mastercard, which counts New Delhi as a key growth market, had earlier in 2019 said it was “bullish on India”, a country where it has made major investment bets and built research and technology centres.