Reserve Bank proposes new umbrella entity for retail payments system

HYDERABAD:  The RBI has proposed setting up a new pan-Indian umbrella entity for retail payments system and has published a draft framework on Monday. It has sought stakeholder comments by February 25. The new entity will be involved in the development and monitoring of new payment methods, standards and technologies.

The proposed entity or entities will set up, manage and operate a new payment system in the retail space, which includes ATMs, white label PoS, Aadhaar-based payments and remittance services. It will have to be a company incorporated in India under the Companies Act 2013 and maybe a for-profit or a Section 8 company, as may be decided by it.

“The NUE shall have a minimum paid-up capital of Rs 500 crore (to support, address the capital needs for managing risks, invest in technological infrastructure, for business operations, etc),” RBI said.

Further, the promoter group shall not have more than 40 per cent investment in the capital of the NUE and should demonstrate upfront capital contribution of not less than 10 per cent (Rs 50 crore). A minimum networth of Rs 300 crore will have to be maintained by the NUE at all times, it added.

It may be noted that the central bank had previously set up National Payments Corporation of India (NPCI) in 2008 that currently oversees retail payment and settlement in India, including UPI and RuPay. It had also set up the National Electronic Funds Transfer System and Electronic Clearing Service.

But as electronic transactions gained traction, RBI found it necessary to set up the NPCI to monitor retail payments. The new entity for retail payments will also be responsible for monitoring retail payments system developments and related issues in the country and internationally to avoid shocks, frauds and contagions that may adversely affect the system.

The entity will also have to comply with the corporate governance norms, along with fit and proper criteria for persons to be appointed on its board. RBI will have the right to approve the appointment of directors and also nominate a member to the board.