Reliance, Paytm & others

to end NPCI monopoly.

What is NUE licence?
- By Ankit Agrawal

27-02-2021
27-02-2021
 ankitmay28@gmail.com ankitmay28
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27-02-2021
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27-02-2021
 WHAT HAS HAPPENED?

Last date to apply for a licence to set up a pan-India umbrella

entity for retail payments, has been extended
from Feb 26 to March 31.

The Reserve Bank India (RBI) had released the framework for
authorisation of pan-India umbrella entity
for retail payments,

Which will rival National Payments Council of India (NPCI),

on August 18, 2020, and invited applications
from interested entities.
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 WHAT IS RETAIL PAYMENT SYSTEM?

Retail payments usually involve transactions between

two consumers, between consumers and businesses,
or between two businesses.

Although there is no definitive division between retail and

wholesale payments,

Retail payment systems generally have higher transaction

volumes and lower average values than
wholesale payment systems.
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 NATIONAL PAYMENT CORPORATION OF INDIA

NPCI, a ‘not-for-profit’ entity registered under section 8 of

Companies Act, is owned by a consortium of leading
public and private sector banks.

It is directly responsible for functioning of highly important

digital payment channels such as Unified Payment Interface,
NACH, National Financial Switch (NFS) and IMPS.

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 The NPCI, set up in 2008, currently
dominates the retail payments space and
operates more than 12 such platforms.

Established by
RBI & IBA.
 54 banks currently shareholders of NPCI include 17 public sector
banks, 17 private banks, 3 foreign banks, 10 co-op banks,
and 7 regional rural banks.

As of November 2020, the top shareholders of NPCI included-

Union Bank of India with 9.15%

Bank of Baroda with 9.15%
PNB 9.15%
Canara Bank 8.14%
SBI 7.12%
Bank of India 7.12%
ICICI Bank 7.12%
HDFC Bank 7.12%
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 The RBI, in February 2019, had proposed to create an
alternative umbrella organisation for retail payments to
prevent monopoly and concentration risk.

In a policy paper, the central bank had suggested that the

NPCI became ‘too big to fail’.

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The Reserve Bank of India has issued final guidelines
for a new umbrella entity for retail payments systems,
which will have an option to operate as a
“for-profit” entity.

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 WHO CAN APPLY?

Payments system operators, and payments and

technology service providers

With three years of experience are eligible to apply and

set up the new pan-India platform.

The last date to apply for a licence is Feb. 26, 2021,

now extended till 31st March.

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 WHAT RBI EXPECT FROM NEW ENTITY?

It’s expected that the [new] umbrella entity shall offer

innovative payment systems,

To include hitherto excluded cross-sections of the society, and

which enhances access, customer convenience and safety,
and the same shall be distinct yet interoperable.

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 WHAT THE NEW ENTITY CAN DO?

The alternative umbrella entity can set-up, manage and

operate new retail payment systems related to-

Automated-teller-machines, white-label point-of-sale

devices, Aadhaar-based payments and
remittances services.

The NUE is expected to develop systems that able to

interact and be interoperable.
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 SO, WHO HAVE APPLIED FOR NUE LICENCE?

At least four or five consortiums, comprising of banks,

corporates, e-commerce and payment companies are
keenly looking at the New Umbrella Entity (NUE)
licence as the deadline to apply ends soon.

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The country’s largest public and private banks including State
Bank of India, ICICI Bank, HDFC Bank, Bank of Baroda, Axis
Bank, Kotak Mahindra Bank and Yes Bank are looking
to participate in the NUE.

Goverment is yet to give SBI, Bank of Baroda approvals to

apply for the NUE licence, so it remains to be be seen
if they will make the deadline.

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Among corporates, Reliance Industries through its subsidiary
Reliance Jio Infocomm Limited, and Tata Group through
company called Ferbine Private Limited are also
seeking the NUE licence.

Global companies like Amazon, Visa, MasterCard, and others

like Bill Desk, PayU, Pine Labs, SoHum, Flipkart, and
PayTM are also expected to join in the race as
part of one or the other consortiums.

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 REMEMBER THIS

No single promoter is allowed to have more than 40%

investment in the capital of the NUE, as per RBI guidelines.

The promoter shareholding can be diluted to a minimum of

25% after five years of the commencement of business
of the umbrella entity.

The NUE would also have to maintain a minimum net-worth

of Rs 300 crore at all times.

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 WILL IT REPLACE NPCI?

Any retail payments solutions created by the new umbrella

entity or entities should interact and be interoperable with
existing systems operated by the National Payments
Corporation of India, the RBI said.

That means the new entity will compete on developing new

retail payments technology and not necessarily replace
payments platforms operated by the incumbent.

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Q. Banking in India has its origin. as early as?

A) Indus civilization period

B) Vedic period

C) Mughals period

D) British period

27-02-2021
 Reliance, Paytm & others
to end NPCI monopoly.
What is NUE licence?
- By Ankit Agrawal

27-02-2021
13-04-2020
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