Still, even in cases where the transactions are processed abroad, the RBI said such data must be "deleted from the systems abroad and brought back to India" within 24 hours of payment processing.
"The clarity on processing, and the ability to do so overseas, is a welcome development. Although the clarifications do not ease the local-only storage requirement," said Kriti Trehan, a partner specializing in technology law at the Law Offices of Panag & Babu.
Mastercard and Visa did not immediately respond to a request for comment.
The RBI clarification comes days after India's commerce ministry, following a meeting with technology and payment companies, said the central bank would "look into" concerns raised by the industry.
The differences between American companies and India have further fuelled trade tensions between New Delhi and Washington.
On Wednesday, U.S. Secretary of State Mike Pompeo sought to reduce these tensions, promising a renewed focus on negotiating better ties, but gave few specifics during a visit to New Delhi.
India wants more stringent data storage rules so it can better access data and conduct investigations when the need arises.
Other than RBI's directive for payment companies, India has also drafted an overarching law on data storage which calls for all personal data determined to be critical to be processed locally.