The Reserve Bank of India (RBI) found Mastercard to be in violation of its April 2018 circular that directed all payments data be stored exclusively in India, allowing the regulator "unfettered supervisory access" to transaction details

India's central bank has banned global payments giant Mastercard from adding new customers starting next week, in an escalation of a long-standing dispute on local data storage rules.

The Reserve Bank of India (RBI) found Mastercard to be in violation of its April 2018 circular that directed all payments data be stored exclusively in India, allowing the regulator "unfettered supervisory access" to transaction details.

Global payments service providers like Mastercard, Visa and American Express have lobbied against data localisation, citing increased costs.

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

Mastercard will be indefinitely blocked from issuing debit, credit or prepaid cards to customers in India from July 22.

The move comes less than three months after India's central bank barred American Express and Diners Club International, owned by Discover Financial Services, from issuing new cards due to similar violations.

But unlike American Express, which is a relatively small player in India, companies such as Mastercard and Visa have partnered with many Indian banks that offer cards using the US firms' payments network.

In 2019, Mastercard said it was "bullish on India", announcing $1 billion in investment over the next five years, in addition to its earlier investment of $1 billion from 2014-2019.

The RBI's decision will not impact existing customers of Mastercard, and the company should advise all card issuing banks in India to comply with the order, the RBI added.

The RBI directive in 2018 sparked an aggressive lobbying effort from US companies, which said the rules would increase their infrastructure costs and hit their global fraud detection platforms, but the central bank did not relent.

Global payments card companies have faced increasing competition from India's United Payments Interface (UPI) transactions that offer card-less and cashless payment options using phone numbers and QR codes.

A record 2.8 billion UPI transactions worth some 5.5 trillion rupees ($73.8 billion) took place in June.