The Reserve Bank of India (RBI) has indefinitely barred Mastercard from issuing new debit, credit or prepaid cards to domestic customers for violating local data storage rules.

The ban, which comes into effect from 22 June, is a severe jolt to the US firm in a key growth market.

In a Wednesday notification, the RBI said Mastercard had not complied with data storage rules from 2018. This requires foreign card networks to store Indian payments data "only in India" so that the regulator can have "unfettered supervisory access".

"Notwithstanding lapse of considerable time and adequate opportunities being given, the entity (Mastercard) has been found to be non-compliant with the directions on Storage of Payment System Data," the RBI said in a statement.

The RBI order, however, will not impact existing customers of Mastercard, which is one of the top three card-issuers in India. Mastercard should advise all card-issuing banks and non-banks to conform to these directions, the RBI added.

Responding to the RBI directive, Mastercard said: “We are fully committed to our legal and regulatory obligations in the markets we operate in. Since the issuance of the RBI directive requiring on-soil storage of domestic payment transaction data in 2018, we have provided consistent updates and reports regarding our activities and compliance with the required stipulations. While we are disappointed with the stance taken by the RBI in their communication dated 14 July, we will continue to work with them to provide any additional details required to resolve their concerns. Building on our considerable and continued investments in India, we remain committed to working with our customers and partners in advancing on the government’s Digital India vision.”

In 2019, Mastercard said it was "bullish on India" and announced $1 billion additional investment over the next five years. A similar amount was invested from 2014-2019.

The RBI has earlier penalised firms for non-compliance with local data-storage rules. Introduced in 2018, the rules mandated payment firms to store all Indian transaction data in local servers and compliance was to be carried out within six months.

In April, the RBI barred American Express and Diners Club International from issuing new cards due to similar violations. But these were smaller players in the Indian market, compared with Mastercard and Visa.

Visa, Mastercard and several other US companies lobbied to get the directive relaxed stating that it would increase their infrastructure costs and hit their global fraud detection platforms. This would lso allow the regulator “unfettered supervisory access”. The RBI, however, stuck to its stance.

The Indian government has been pushing for the growth of the domestic payments network, Rupay.