India Restricts American Express Over Data Storage Rules

India's Central Bank Restricts American Express and Diners Club

The Reserve Bank of India (RBI) has imposed restrictions on American Express and Diners Club, preventing them from onboarding new customers beginning next month. This action, announced on Friday, stems from a failure to adhere to the country’s data-storage regulations.

Data Storage Rule Violations

According to a statement released by the RBI, current customers of both card companies will not be affected by this new directive, which takes effect on May 1st.

This marks the first instance of the RBI penalizing a company for non-compliance with the local data-storage rules initially introduced in 2018. These regulations mandate that all Indian transaction data be stored on servers located within the country.

Previous Appeals and Compliance Efforts

Previously, Visa, Mastercard, and other payment firms, alongside the U.S. government, have urged New Delhi to reconsider these rules. The intention behind the regulations is to provide the regulator with “unfettered supervisory access.”

Visa, Mastercard, and American Express had collectively attempted to modify or entirely eliminate the rules. However, with these efforts proving unsuccessful, the majority of firms initiated steps toward compliance.

Company Responses

An American Express spokesperson expressed disappointment with the RBI’s decision in a statement released Friday evening. The company affirmed its commitment to working with the authorities to address the concerns “as quickly as possible.”

American Express currently serves approximately 1.5 million customers in India, representing the largest customer base among foreign banks operating within the nation.

The spokesperson further stated, “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.”

Diners Club, owned by Discover Financial Services and operating in India through a partnership with HDFC Bank, indicated that India remains a significant market. They are collaborating with the central bank to find a resolution that will allow them to “continue to grow in the country.”

Recent Regulatory Actions and Market Shifts

Last year, the RBI instructed HDFC Bank to halt the addition of new credit customers and the launch of new digital services following a service disruption caused by a power outage.

This latest order arrives as Citigroup, another prominent foreign bank in India, has announced its plans to withdraw from most of its Asian consumer businesses in an effort to enhance profitability. The bank’s consumer operations across 13 countries are currently being offered for sale.

Data localization is a key focus for the RBI, aiming to strengthen regulatory oversight.

The restrictions on American Express and Diners Club highlight the importance of adhering to India’s evolving financial regulations.