The Reserve Bank of India (RBI) has shelved the plans for the New Umbrella Entity (NUE), which was supposed to be an alternative digital retail payment system similar to the National Payments Corporation of India (NPCI).
Addressing the media after the Monetary Policy Committee meeting, RBI’s deputy governor T Rabi Sankar said that the NUE aimed to bring innovation and new ideas to the payments infrastructure, which is already developed. He added that proposals received from applicants were not innovative enough, and hence RBI is abandoning the NUE idea.
With NUE, RBI wanted to encourage competition, innovation and reduce concentration risk to achieve financial stability in the retail payment system. In a nutshell, it wanted an UPI alternative which processes close to 60% of retail electronic payment transactions in the country.
In 2019, RBI proposed the NUE with an objective to help enhance the reach of digital payments to a larger number of people and thereby reduce the dependency on cash. This followed by RBI releasing a draft framework for authorisation of a pan-India.
The proposed NPCI-alternative met with much optimism as India’s Reliance reportedly partnered with global giants Facebook and Google to apply for setting up the new framework. The likes of Paytm, Tata Group, and Amazon were also in the fray.
Earlier this year, the central bank reportedly put license bids for the NUE on hold as they did not meet the expectations.
It’s worth noting that the NPCI’s digital payment system, the Unified Payment Interface (UPI), is already a huge hit in the country.
As of March 2023, as many as 399 banks were live on the UPI, which processed 868.5 crore transactions worth Rs 14.1 lakh crore. Overall, the payment interface helped process 8,376 crore transactions in FY23, which amounts to roughly Rs 139 crore.
Of late, the UPI has also seen a few important updates. For instance, the NPCI last month announced adding support for merchant transactions through credit cards on UPI. It’s also going global. The UPI has been recently linked with its counterpart payment system in Singapore called PayNow.