The United States has been frustrated since India’s central bank banned issuance of new cards due to the violation of data storage rules.

A senior US trade official privately criticized India’s July decision to ban Mastercard Inc from issuing new cards, calling it a “draconian” move that caused “panic”, according to emails from the US government consulted by Reuters.

The documents show frustration within the U.S. government after India’s central bank banned issuance of new cards by American Express and Diners Club International in April, then took similar action against Mastercard in July.

The Reserve Bank of India has accused the companies of breaking local data storage rules. The bans do not affect existing customers.

The ban on Mastercard – a leading payments network in India alongside Visa – sparked a wave of emails between US officials in Washington and India as they discussed next steps with Mastercard, including the RBI’s approach, according to government emails.

“We have started to hear from stakeholders talking about some pretty draconian measures the RBI has taken over the past two days,” wrote Brendan A Lynch, the United States’ deputy deputy trade representative for South Asia and Central Asia, July 16, two days after the Mastercard Announcement.

“It appears that others (Amex, Diners) may have been affected by similar actions recently,” Lynch wrote, asking his colleagues in India to contact their contacts with the central bank “to see what happens”.

Lynch, a spokesperson for the office of the US trade representative and the US embassy in New Delhi did not respond to requests for comment. The US government has not publicly commented on the Mastercard ban.

The RBI did not immediately respond.

A Mastercard spokesperson told Reuters: “We have had very constructive engagements with the Indian and US governments over the past few weeks and we appreciate the support from both.” This includes discussions with the RBI, and Mastercard has “made good progress” as it seeks to resolve the situation quickly, he said.

Degraded commercial links

Mastercard sees India as a key growth market. In 2019, he said he was “bullish on India”, a country where he has made major investments and built research and technology centers.

The Mastercard ban has rocked the company and shocked the Indian financial industry as Indian partner banks fear a drop in revenues as they struggle to quickly partner with new networks to offer cards.

The RBI took action against Mastercard because it was “deemed non-compliant” with the 2018 rules despite the “considerable time frame and adequate opportunities”.

The rules, forcing foreign card networks to store Indian payment data locally for “unhindered surveillance access,” were implemented after unsuccessful lobbying efforts by U.S. companies also worsened the business relationship between New Delhi and Washington.

Mastercard said she was “disappointed” with the decision. The company told Reuters it submitted an additional audit report to the RBI before the ban took effect on July 22.

Emails from the US government show there was hope things could be sorted out before that.

In one, Lynch told his colleagues it was understood that “the RBI has the information it needs and is hoping it will respond appropriately.” But as the ban approaches, “if the RBI doesn’t change course, I’m sure the panic will resume,” he wrote.

Days later, he wrote that Mastercard continued to “bring the full court press” to Washington.

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