Monday, 30th October 2017

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NPCI rival in the making

RBI released a draft framework for the creation of such an entity for retail payment systems

  • Published 12.02.20, 2:33 AM
  • Updated 12.02.20, 2:33 AM
  • 2 mins read
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The RBI said in the draft framework that the entity eligible to apply as a promoter or promoter group for the NUE will be owned and controlled by residents with three years’ experience in the payments ecosystem as a payment system operator or a payment service provider. (Shutterstock)

The Reserve Bank of India (RBI) has proposed the creation of a new pan-India umbrella entity (NUE) focusing on retail payment systems, which could rival the National Payments Corporation of India (NPCI).

The central bank on Monday released a draft framework for the creation of such an entity for retail payment systems.

This follows a policy paper put out by the central bank in January last year where it said that while the NPCI has become an organisation which is key to the operations of many of the critical retail payment systems of the country, there is “concentration of many tasks”.

The paper had said that in October 2018, the NPCI has processed nearly 48 per cent of the retail electronic payment transactions in volume, aggregating to 15 per cent of the value of retail electronic payment transactions.

The NPCI, which offers services such as UPI, IMPS and BHIM, is an umbrella organisation for operating retail payments and settlement systems in India. It was formed under the initiative of the RBI and the Indian Banks’ Association (IBA), under the provisions of the Payment and Settlement Systems Act, 2007.

The RBI said in the draft framework that the entity eligible to apply as a promoter or promoter group for the NUE will be owned and controlled by residents with three years’ experience in the payments ecosystem as a payment system operator or a payment service provider.

While the shareholding pattern should be diversified, any entity holding more than 25 per cent of the NUE will be deemed to be a promoter.

The RBI added that the scope of activities of the NUE will be to set up, manage and operate new payment systems, particularly in the retail space, consisting of but not limited to ATMs, white label PoS, and Aadhaar-based payments and remittance services.

It will also have to develop new payment methods, standards and technologies and take care of developmental objectives such as the enhancement of awareness about the payment systems.

In addition, it will have to operate clearing and settlement systems, identify and manage relevant risks like settlement, monitor retail payment system developments and related issues in the country and internationally to avoid shocks, frauds and contagions.

According to the draft framework comments for which has been sought from all stakeholders by February 25, the promoter or the promoter group will also have to conform to the RBI’s “fit and proper” criteria. The policy paper said the NUE should have a minimum paid-up capital of Rs 500 crore.