RBI releases framework for new umbrella entity for retail payments

The Reserve Bank of India (RBI) on Tuesday released the final framework for authorisation of a new umbrella entity (NUE) for retail payments, following the draft released on February 10.

The guidelines demand that applicants have at least three years of experience in the payments space and a minimum paid-up capital of Rs 500 crore.

At present, only National Payments Corporation of India (NPCI), a not-for-profit company, performs this role.

The NUE could choose to be a for-profit entity or a not-for-profit as defined under Section 8 of the Companies Act.

The systems that it develops will be expected to interact and be interoperable, to the extent possible, with the systems operated by NPCI.

No single promoter shall have more than 40% investment in the capital of the NUE.

They shall upfront demonstrate capital contribution of not less than 10% at the time of making an application for setting up of the umbrella entity.

The balance capital shall be secured at the time of commencement of business. The promoter shareholding can be diluted to a minimum of 25% after five years of the commencement of business of the umbrella entity.

A minimum net-worth of Rs 300 crore shall be maintained at all times.

The entity will be entitled to set up, manage and operate new payment systems in the retail space such as ATMs, white label PoS, Aadhaar-based payments and remittance services.

They can also operate clearing and settlement systems for participating banks and non-banks.

“The umbrella entity may be permitted to participate in Reserve Bank’s payment and settlement systems, including having a current account with Reserve Bank, if required,” the central bank said in the notification.

Applications for setting up an NUE must reach the RBI by February 26.

The umbrella entity shall begin operations within six months to one year from the date of ‘in-principle approval’.