Two months after proposing to set up an alternative retail payment system in India, the Reserve Bank of India (RBI) has released a draft framework for authorisation of a pan-India New Umbrella Entity (NUE).
The central bank has invited comments on the draft framework from all stakeholders by February 25.
“The objective is to set up new pan-India umbrella entity focussing on retail payment systems,” said RBI in the release.
According to the release, the NUE may be a ‘for-profit’ or a Section 8 Company incorporated in India. It will be governed by the provisions of the PSS Act and other related guidelines.
The entity eligible to apply as promoter or promoter group for the NUE will be ‘owned and controlled by residents’ (as per FEMA Regulations).
“The NUE will have a minimum paid-up capital of Rs 500 crore. No single promoter or promoter group will have more than 40% investment in the capital of the NUE,” added the RBI draft.
RBI, through the move, aims to encourage competition, innovation and reduce concentration risk to achieve financial stability in the retail payment system.
It plans to end the monopoly of existing umbrella organisation for retail payment system by the National Payments Corporation of India (NPCI).
NPCI processed about 60% of retail electronic payment transactions by volume, as per the last figure, in October 2019.
Besides, RBI in the past had expressed concern on the lack of NPCI falls back arrangements in case of a data breach or negative financial event.
In December last year, the RBI had proposed to set up an alternative digital retail payment system.
“By offering alternative digital retail payment systems to the consumers, the NUE would help in enhancing the reach of digital payments to a larger number of people and thereby reduce the dependency on cash,” the central bank had said.