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RBI to examine concerns over Data Localization Rule

RBI to examine concerns over Data Localization Rule

The RBI will examine concerns around its strict data localization rules that require storing of customer data exclusively in India without creating mirror sites overseas.

The Reserve Bank of India (RBI) in April 2018 asked payment firms to ensure their data are stored exclusively on local servers, setting a tight six-month deadline for compliance.

That deadline was said to have been missed by some foreign firms including credit card giants Visa and Mastercard.

What is the concern of payment companies?

International giants usually store data on global servers and the requirement to store data locally would require them to make an additional investment.

But policymakers in India believe storing data locally would help monitor and conduct investigations if the need arises.

Besides the RBI rule, concern was also expressed at the meeting about a draft e-commerce policy that requires exclusive local storage and processing of data generated by users in India from various sources including e-commerce platforms, social media and search engines.

While domestic companies such as Reliance Jio have spoken up in support the government's data localisation efforts, others like Facebook, Amazon, Microsoft, and Mastercard have led the way in opposing it.

Way Forward

  • There is an urgent need to have an integrated, long-term strategy for policy creation for data localisation.
  • Data localisation needs to integrate a wide range of social, political and economic perspectives.
  • Creating an opportunity for local data centres all over the country.
  • Devising an optimal regulatory and legislative framework for data processors and data centres operating in the country.
  • Adequate infrastructure in terms of energy, real estate, and internet connectivity also needs to be made available for India to become a global hub for data centres.

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