MasterCard Ban: RBI Seeks Action Plan from Banks

India’s central bank has asked lenders to put in place business continuity plans (BCP) after it ordered operational curbs, effective last week, on MasterCard. It has also sought details on their preparedness to regularize the issuance of credit and debit card on alternative payments platforms, such as Visa and RuPay, three people aware of the development told ET.

The Reserve Bank of India (RBI) has also reached out to various lenders on the problems being faced by the broader banking system after it barred the US payments major from issuing new cards for its alleged failure to comply with data localization rules. “The regulator has been actively pursuing banks to activate BCPs after it banned MasterCard,” a top executive at a lender told ET. “We have also been asked to update the RBI on the impact this move is having on the banking system and what measures banks are taking to plug a possible system-wide impact. There is a dearth of plastic and the on-boarding process will take time.”

The RBI, which ordered the curbs on July 14, did not respond to ET’s mailed query, besides credit cards, even opening of new saving accounts could be hit as the process will have to be migrated to either Visa or RuPay. Industry insiders also pointed out that State Bank of India (SBI), HDFC Bank, ICICI Bank and Axis Bank could be the worst hit as they generally open hundreds of thousands of accounts every month. For instance, HDFC Bank added 1.64 million current and savings bank accounts in the June quarter alone.

Banks are hopeful that the curbs on MasterCard would be lifted soon but a section of the industry feels it could take nearly three months to return to normal.

“While we are migrating to Visa and RuPay, the system will be hit for at least 10-12 weeks before it normalizes,” said a top executive at another lender.

As per a report by Nomura, while RBL Bank and Yes Bank have all their credit card schemes on the MasterCard platform for HDFC Bank it is 45%, ICICI Bank 36% and Axis Bank 35%. S-ET

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