RBI Bans American Express and Diners Club: Here’s Why

In a recent development, the Reserve Bank of India (RBI) has imposed restrictions on American Express Banking Corp and Diners Club International Ltd. The central bank has barred these two entities from onboarding new domestic customers onto their card networks from May 1, 2021. This decision has raised several questions among the public and existing customers of these companies. Let’s delve into the reasons behind this move and its implications.

Reason for the Ban

The RBI’s decision to impose restrictions on American Express and Diners Club is a result of their non-compliance with the guidelines on storage of payment system data. The central bank had issued these guidelines in April 2018, instructing all payment system providers to ensure that data related to payment systems operated by them is stored in a system only in India. This was to ensure better monitoring and to have unfettered supervisory access to data stored with these system providers.

Non-Compliance with RBI Guidelines

Despite the clear instructions, American Express and Diners Club failed to comply with the guidelines within the given timeframe. The RBI found these entities to be in non-compliance during the course of a supervisory review. Hence, the central bank decided to take stringent action against them to set an example for other entities and to ensure the security of the payment systems data.

Implications for Existing Customers

The RBI’s decision does not impact existing customers of American Express and Diners Club. The ban is only on onboarding new domestic customers onto their card networks from May 1, 2021. Existing customers can continue to use their cards as usual. However, the companies will not be able to issue new cards in India until they comply with the RBI’s data storage guidelines.

Way Forward for American Express and Diners Club

The RBI’s decision is a wake-up call for American Express and Diners Club. They will now have to take immediate steps to comply with the data storage guidelines. Once they demonstrate compliance, the RBI may consider lifting the ban. However, until then, they will have to bear the brunt of not being able to onboard new customers in India.

In conclusion, the RBI’s decision to ban American Express and Diners Club from onboarding new customers is a stern reminder for all payment system providers to comply with the data storage guidelines. It underscores the importance the central bank places on the security of payment systems data and its commitment to ensuring the same.