Disclaimer: Everything expressed below are only my own personal views and opinions reg. the latest news from RBI. It may or may not be factually correct.

RBI is on full swing lately and have banned multiple credit card issuers from acquiring new credit card customers. Here’s everything you need to know about them.

American Express

  • The Ban: Can’t acquire new customers from 1st May 2021.
  • The Reason: Payments data are not stored locally.

RBI in the past has passed the circular dated April 6, 2018 on Storage of Payment System Data advising all payment system providers (“PSPs”) to ensure that data, relating to payment systems operated by them (“Payments Data”), is stored in India.

It seems Amex has crossed the deadline and so is the ban. I’m sure American Express is not a company that ignores “regulations” but I’m shocked to see this. I wonder what Amex was doing for 2 years!!

Apart from regulation, it will also help customers, as transactions on Amex network is now calculated on EST time-zone which doesn’t help those doing last minute transactions on few cards to avail the monthly bonus.

When will the ban be lifted?

Depends on how good Amex is prepared to handle this. 

If they have already made things ready and are in final phase (hoping so), maybe Amex would submit the necessary documents ahead of 1st May 2021 or may take about a month max to get it sorted.

If not, forget about the lift of ban for next ~6 months. But I doubt about longer delays, as American Express India does only Cards business primarily and this ban would affect the life of thousands of Amex Employee’s – especially those in sales – the already stressed segment due to the pandemic.

Side note: Maybe this is somewhere related to the recent update with Amex and CIBIL reports. So maybe they’re already on it, to an extent?

HDFC Bank

  • The Ban: Can’t acquire new customers from 2nd Dec 2020.
  • The Reason: Frequent Outages with HDFC Internet/mobile banking, etc

Its been about 4 months since the ban has been placed on HDFC from issuing new cards. I’m surprised to see that the ban is still not lifted on India’s #1 bank – as they call so.

When will the ban be lifted?

As per the details I got from guys handling servers: I’m expecting it to happen in ~6 months timeframe as that’s the time taken to transfer the data to the new infrastructure, then report it and get a green signal from RBI.

We’re getting closer to that 6 months now and as of mid April 2021, it seems a third party Audit is happening on the upgraded infrastructure and is in the final stage now. So we will have to wait and see.

Diners Club

  • The Ban: Can’t acquire new customers from 1st May 2021.
  • The Reason: Payments data are not stored locally.

This is same as the Amex issue seen above, but I wonder how it matters, as anyway HDFC – the network partner for Diners Club is having the payments data of Diners cards with them locally in India.

Maybe RBI want Diners to process these Diners payments from India. If so, I don’t think this is going to happen anytime soon. But I maybe wrong too, as I’m not sure of the development with Diners Club.

The Fun Fact: India has just banned the company that invented the concept of credit cards. That’s right. Diners Club International, founded in 1950 was the first independent credit card company in the world to issue credit cards.

All types of Miracles happen in India! Its good to see RBI showing the power of India. But at the same time wish they also improve the domestic payment systems like Rupay.

Customer Impact

  1. New Customers: Its a bad news for those who’re new to Amex & HDFC, as they have one of the amazing credit card products in the country.
  2. Existing Customers: It’s a normal day for existing customers and are allowed to upgrade/downgrade cards as they wish, within the issuer.

Apart from above, existing customers may enjoy lucrative offers from HDFC & Amex to avoid customers moving out and to geenrate more revenue.

We’ve seen this already with HDFC and it would be interesting to see from Amex too now. Expect some mind-blowing merchant/targeted offers from American Express if the ban goes live from 1st May 2021.

Where will new customers go?

With the ban on HDFC & Amex from Issuing new cards, where will the new cardholders go?

The mass market segment would move to SBICards, ICICI & others. That applies well for HDFC.

But those in premium segment and those who’re knowledgable would go for other premium issuers like Axis, SC and even Citi as they’re still active in card issuance.

I personally feel its an amazing opportunity for Axis Bank. Hope Axis strikes while the iron is hot. But I wish Axis speeds up the onboarding process.

Why RBI is rough?

I wonder why RBI is taking such huge decisions in short notice. I mean, I wish a circular like placing a ban on primary revenue source of a business is better sent a “month” in advance.

But actions like these might force good foreign companies too to move out of the country – just like how Citi exit India recently. While Citi says it’s more of a business decision, some do say that one of the reason is: regulations in India are not favourable for Citi with current setup.

So what’s the reason for all these rough decisions by RBI in payments industry? That too why especially on credit card issuers? Maybe all of them to favour SBICard? or is it mere coincidence? We never know!

Also, I think its essential for RBI to take such steps, maybe because the banking industry has had enough scam’s in the past and maybe RBI is pro-active now to control that.

Looking at the trend, I wish Visa & Mastercard are not in the queue to be banned next. Let’s hope they obey the rules!

Final Thoughts

In a nutshell, RBI has put a ban on two of the best credit card companies in the country – the only two issuers serving premium customers pretty well, excluding Citi as they’re leaving India anyway.

While Covid-19 is giving shocks to humans every other day, RBI is giving equal shocks to credit card companies every now and then.

RBI is hopefully doing the right thing for India as a whole, but I think it could be done better, smoother and in a more friendly way.

Like, they could instead put a penalty on these companies and use those funds to speed up the Covid-19 Vaccination drive, among many other things to build a better India.

Let’s hope the pandemic settle down at the earliest and hope both American Express & HDFC get’s back in game soon and shine bright like a diamond.

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