The Reserve Bank of India has taken yet another step towards opening the mandate of issuing and operating of new retail payment channels to private sector players. A draft framework detailing the eligibility and governance criteria of the proposed ‘new umbrella entities’ (NUE) along with scope of activities has now been issued by the central bank for public scrutiny.
This, the banking regulator believes, has been necessitated for the prevention of “concentration risk” in India’s burgeoning digital payment landscape where the mandate of issuing and governing payment channels is largely monopolised by the National Payments Corporation of India (NPCI).
As per these proposed guidelines, only those entities with at least three years of experience operating as payment operator or service providers can apply as a promoter group. Furthermore, these entities can either be ‘for profit’ or be registered under the Section 8 of Companies Act as a non-profit company like NPCI.
The NUE should also maintain a minimum net-worth of ₹300 crore always. Among other functionalities, the proposed umbrella body primarily will set up, manage and operate new payments system, especially in the retail space.
This can “comprise of but not limited to ATMs, White Label PoS, Aadhaar-based payments and remittance services,” RBI said.
The NUE will also be given a mandate to develop new payment methods, standards and technologies and operate clearing and settlement systems, it said. The proposed entity will also have an RBI appointed independent director on the board.
“Scrutiny of applications will be undertaken by an External Advisory Committee (EAC),” the RBI has said.
“The EAC will submit its recommendations to the Reserve Bank. Board for Regulation and Supervision of Payment and Settlement Systems (BPSS), will be the final authority on issuing authorisation for setting up NUE.”
The central bank has set a tentative timeline of six months to complete the process of application and issuing licenses.
“Over a decade NPCI has performed as the sole umbrella organization for retail payment systems in India,” Shaktikanta Das, RBI governor had said during his Monetary Policy address. “Availability of NUE offering products which will lead to the redundancy of existing systems can, besides addressing concentration risk, also encourage competition and innovation, thus contributing to financial stability.”
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