The Reserve Bank of India has come out with the final framework for authorization of a new umbrella entity (NUE) for retail payments. The draft of the framework was released in February 2020. Entities with a minimum of 3 years of experience in the payments space and a minimum paid-up capital of Rs 500 crore can apply, says the RBI notification in this regard. At present, the National Payments Corporation of India (NPCI) is the only organization in the country performing this role. While NPCI is a not-for-profit company, the proposed 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 NUE develops will be expected to interact and be interoperable, to the extent possible, with the systems operated by NPCI. The guidelines specify that no single promoter shall have more than 40% investment in the capital of the NUE. The RBI has also laid out rules regarding capital contribution at the time of making an application for setting up of the NUE as well as at the time of starting operations. 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. It will also manage clearing and settlement systems for participating banks and non-banks, and also monitor developments in the retail payment system and related issues, both in India and abroad, in order to avoid shocks. The framework lays out that the NUE may be permitted to participate in RBI’s payment and settlement systems, including having a current account with the central bank, if required. The NUE will have to abide by corporate governance norms and the ‘fit and proper’ criteria for persons to be appointed on the board. The RBI may nominate a member to the board too, and has the right to approve of the appointment of directors.
