Impact of Mastercard Ban on Banks and NBFC

Introduction:

The Central Bank of India- Reserve Bank of India (RBI) barred Mastercard from issuing new debit cards and credit cards to the customers from the 22^nd of July 2021. In a statement issued on Wednesday 15^th July 2021, RBI Said “The Reserve Bank of India (RBI) has today imposed restrictions on Mastercard Asia/Pacific Pte. Ltd. (Mastercard) from onboarding new domestic customers (debit, credit, or prepaid) onto its card network fro, July 22, 2021.”s

Ban on Mastercard:

• Reserve Bank of India on Wednesday 15^th July 2021 barred Mastercard from issuing new debit cards and credit cards.
• This order will come into effect from 22^nd July 2021.
• The ban on Mastercard has been done on account of not compiling with the rule of not storing the data related to the transaction, payments, and others in India.
• This decision will not impact the existing user of Mastercard.

Impact of Ban on Banks & NBFC:

Following are the stocks which might be highly affected by this step of RBI of banning Mastercard:

1) RBL Bank:

• RBL Bank was having 100% dependency on the Mastercard as all types of cards issued by the bank were of Mastercard only.

Hence, this bank may suffer up to a great extent post banning of the Mastercard

2) Yes Bank:

• The same scenario like RBL Bank goes with the Yes Bank as well.
• All the cards issued by Yes Bank are of Mastercard and hence the bank may face some hindrance in issuing new cards.

3) Bajaj Finserv:

Bajaj Finserv is an NBFC and not a Banking Institution. But this company also depends fully on Mastercard for issuance of the cards and therefore this company will offer some good amount of problems in issuing cards.

4) HDFC Bank:

• Currently, 45% of the cards issued by the HDFC Bank are of Mastercard.
• Besides this, the HDFC Bank is already facing issues on issuing new credit cards and hence the ban of Master will not have much impact on the bank especially on Incremental Issuance.

5) IndusInd Bank:

After HDFC Bank, IndusInd Bank comes next on the list with 40% dependency on the Mastercard.

6) Other Banks and NBFCs:

Dependency of the other major banks and NBFCs of Mastercard are ICICI Bank (36%), Axis Bank (35%), and SBI Cards (10%).

Conclusion:

All the major banks and NBFC Companies like Bajaj Finserv had a great dependency on Mastercard, but now it would need to take a good amount of time to look at other alternatives like Rupay or Visa. This step of RBI on banning Mastercard on account of data security of Customers is an appreciating approach.