RBI Instigated NPCI and NUE Rivalry

RBI delineates reasons for denying supervision over NUE.

RBI Instigated NPCI and NUE Rivalry THE POLICY TIMES

RBI against having direct and supervisory control over the NEW Umbrella Entities and instead want agencies such as NPCI to take over or form a new body. Citing financial expenses as a major reason to take over the supervisory role RBI officials said, “In our initial discussions, it (high cost) was flagged more than once. Since the operations of NUEs will have financial aspects, the relevant permissions from RBI will still be needed. But the day-to-day supervision and control could be left to any other agency.”

The NUE Framework

The RBI released the framework to set up NUEs, which would be able to carry out various payment services, akin to the ones being provided by the NPCI. As per RBI, the umbrella entity applicants should have a minimum paid-up capital of Rs 500 crore, while no single promoter or promoter group can have more than 40 percent investment of capital. The NUE should maintain a minimum net worth of Rs 300 crore.

Also Read: “Positive Pay System” In Banks from January 1 to Prevent Cheque Payment Frauds

The five consortiums permitted

Tata Groups Ferbine consortium including the likes of Bharti Airtel, HDFC Bank, Kotak Mahindra Bank, Mastercard, and PayU. Tata Group took over State Bank of India‘s bid for an NUE payments license after the state-run lender’s bid was flagged as a potential competition risk. The second consortium comprises Amazon, ICICI Bank, Axis Bank, Visa, and payment gateway operators BillDesk and Pine Labs. The third consortium is occupied by Google, Facebook, Reliance Industries, and Infibeam Avenues. The fifth position was taken by Paytm and Ola, while the last eligible firm was Financial Software and Systems Technologies, which comprises Zoho, Zerodha, Razor pay, and Ujjivan Small Finance Bank.

TPT Advocacy and Recommendations

  • Proposed NUEs plan to create stakes in India’s existing digital payments ecosystem, which is currently dominated by the National Payments Corporation of India (NPCI). Tough competition between both firms will flourish which might affect the economy of the nation and degrade digital growth.
  • The new consortiums will have to create parallel solutions on peer-to-peer and merchant payments and also target the digitally savvy, user base of NPCI products. In a bid to capitalize on the digital space in India, RBI should select firms apt enough to progress the digital economy and not create loopholes in the already crippled system.
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RBI Instigated NPCI and NUE Rivalry
RBI delineates reasons for denying supervision over NUE.
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