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WhatsApp plans to comply with RBI’s data localisation mandate: Report; Why is it needed?

WhatsApp is working to comply with Reserve Bank of India (RBI) regulations on the local storage of payment-related data, the Economic Times reported. “Only some engineering work is left,” an anonymous senior Facebook executive told ET. The messaging platform has been operating its payments service WhatsApp Pay in beta mode for one million users since February 2018 but has run into trouble for not complying with data localisation rules, which require all payments-related data generated in India to be stored within the country.

On Monday, the United States Trade Representative (USTR) criticised India’s restrictions on cross-border data flows and its “onerous” data localisation requirements, and said they were a barrier to digital trade, Business Standard reported. “In 2018, India published a number of measures that would restrict the cross-border flow of data and create onerous data localisation requirements. In October, one such measure was implemented, requiring payment service suppliers to store all information related to electronic payments by Indian citizens within India”, said USTR.

What’s the need for Whatsapp to localise UPI information?

(Nikhil adds)

The RBI has mandated the localisation of data because it needs to do that to perform a supervisory function over transactions. All transactions and account linkages through Whatsapp, Google Pay, Paytm, PhonePe or even BHIM take place through the UPI, and the NPCI, which runs UPI has access to the same payments information that Whatsapp has access to. So, for a supervisory function, the RBI can gain access to that data via NPCI. What’s the need for Whatsapp to localise information here?

WhatsApp Pay’s troubles with regulators

Last October, just days before the RBI’s directive to store all payments data in India came into effect, WhatsApp  announced it had built a system to store payments-related data locally. But in March the RBI said in an affidavit filed in the Supreme Court that WhatsApp Pay was yet to comply with its data localisation rules.

In June 2018 WhatsApp had said that though its payments feature was built on Facebook’s payments infrastructure, the parent company would not store any data pertaining to payments. But in July, Bloomberg reported that this had not allayed concerns about how WhatsApp would store user data. According to the report, the Ministry of Electronics and Information Technology (MEITY) asked WhatsApp and its partner banks to provide more details about the payments system. The ministry also asked the National Payments Corporation of India (NPCI) to check whether WhatsApp was fully compliant with its requirements. The same month, the government said it wanted WhatsApp to prioritise curbing fake news on its platform over its plans to launch a payments service.

The localisation mandate for payments data: A timeline

  • April 6, 2018: The RBI told all payments system operators in India to ensure that payments-related data was stored within the country and gave the companies six months to comply. The RBI wanted data stored locally “to have unfettered access to all payment data for supervisory purposes”.
  • July 12: The Finance Ministry eased the RBI’s directive for foreign payment firms, saying that mirroring a copy of the data in India would be sufficient. Payments companies were relieved, assuming that the Finance Ministry’s directive stood and that it would be okay to mirror user data in India. The companies were awaiting a circular from the central bank to this effect. However, the RBI’s did not issue any such circular.
  • July 27: The long-awaited draft Data Protection Bill 2018 was submitted to the government. It added an another layer of confusion to the matter. The bill reportedly overrode all sectoral regulators and therefore all their directives. It mandated that all data fiduciaries store a copy of users’ personal data in India. Worryingly, it also required mandatory storage of ‘critical personal data’ within India only. The bill, however, failed to explicitly define ‘critical data’.
  • September 6: The RBI asked payment companies to send it fortnightly updates about their progress on local storage of payments data.
  • October 15: The RBI’s circular on localisation of payments data came into effect.
  • February 2019: The Department for Promotion of Industry and Internal Trade released India’s Draft Ecommerce Policy, which included strategies for regulating access to data, mandating data storage requirements, and controlling cross-border data flows.

What the draft e-commerce policy says about data localisation

In February the Department for Promotion of Industry and Internal Trade released India’s Draft Ecommerce Policy, which addressed data localisation among many other issues. Here’s what it said:

“A business entity that collects or processes any sensitive data in India and stores it abroad, shall be required to adhere to the following conditions:

  • All such data stored abroad shall not be made available to other business entities outside India, for any purpose, even with the customer’s consent
  • All such data stored abroad shall not be made available to a third party, for any purpose, even if the customer consents to it
  • All such data stored abroad shall not be made available to a foreign government without the prior permission of Indian authorities
  • A request from Indian authorities to have access to all such data stored abroad shall be complied with immediately
  • Any violation of these conditions shall face the prescribed consequences (to be formulated by the Government).”

“Restrictions on cross-border flows of data shall not apply to the following:

  • Data that is not collected in India
  • B2B data sent to India as part of a commercial contract between a business entity located outside India and an Indian business entity
  • Software and cloud computing services involving technology-related data flows, which have no personal or community implications
  • MNCs moving data across borders… internal to the company and its ecosystem, and does not contain data that has been generated by users in India from various sources, including e-commerce platforms, social media activities, search engines etc.”

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