US trade official calls India's Mastercard ban 'draconian': Report

A document accessed by Reuters has revealed that a senior US trade official has privately criticized India's decision to ban Mastercard Inc from issuing new cards by calling it draconian.

The document says that the US government is frustrated with India after the central bank's April ban on new card issuance by American Express and Diners Club International, followed by a ban by Mastercard in July.

Earlier, the Reserve Bank of India had said that the companies are violating local data-storage rules.

According to US government emails, the ban on Mastercard, which along with Visa is India's most popular payment network, prompted an exchange of emails between US officials in Washington and India as they discussed future with Mastercard.

"We've started hearing from stakeholders about some pretty draconian measures that the RBI has taken over the past couple of days," Brendan A. Lynch, the Deputy Assistant US Trade Representative for South and Central Asia, wrote on July 16, two days after the Mastercard announcement, according to Reuters.

"It sounds like some others (Amex, Diners) may have been impacted by similar actions recently," Reuters quoted Lynch.

According to the news agency, Lynch has asked his colleagues in India to get in touch with their central bank contacts "to see what's going on".

A Mastercard spokesman told Reuters, "We've had very constructive engagements with the Indian and US governments over the past few weeks and appreciate the support of both." This includes discussions with the RBI, and Mastercard has "made good progress" as it looks to resolve the situation quickly, he said.

Mastercard counts India as a key growth market. In 2019, the company said that it was "bullish on India". It said that it has made major investment bets and built research and technology centers in the country.

The ban on Mastercard has rattled the company and it is now upset with the financial sector in India.

According to Reuters, 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."

Mastercard has said it was "disappointed" with the decision and it had submitted an audit report to the RBI on July 22.