NEW DELHI: The Reserve Bank of India (RBI) on Tuesday released a framework for setting up of new umbrella entity for retail payments in the country including net and Aadhar-based payments and remittances as well as ATMs and point of sale payment services.
Currently, only the National Payments Corporation of India (NPCI), a not-for-profit company, performs this role. Officials said the RBI’s move is a bid to reduce the risk of having just one player handling such a vast area of finance. Besides, the central banker is worried that this could lead to monopolistic behaviour.
The central bank, on its part, said that it was inviting interested parties to bid to form the new umbrella entity by February, next year. The major difference with NPCI is that the new entity “may be a ‘for-profit’ or a Section 8 company as may be decided by it”, according to the RBI’s statement. The entity will have to have a minimum paid-up capital of Rs 500 crore and no single promoter group will be allowed have more than 40 per cent stake in the new payments entity. Any investor with 25 per cent or more investment will be considered as a promoter.
Applicants must also have at least three years of experience in the payments ecosystem. “The promoter / promoter group shareholding can be diluted to a minimum of 25 per cent after five years of the
commencement of business of the umbrella entity and a minimum net worth of Rs 300 crore shall be maintained at all times”, the banking regulator added.
Besides, the new entity will have to be abide by corporate governance norms along with ‘fit and proper’ criteria for persons to be appointed on its board. The regulator can nominate a member to the board and will also have the right to approve appointment of directors as it does in the case of banks. The RBI also said the new umbrella entity “is expected to interact and be interoperable, to the extent possible, with the systems operated by NPCI.” The new entity may also be permitted to participate in the Reserve Bank’s payment and settlement systems
New entity will challenge monopoly of NPCI
The new umbrella entity assumes significance as it will challenge the monopoly of the National Payments Corporation of India (NPCI), with the central bank now looking to reduce concentration risks in vast area of finance.