Money & Banking

Retail payment systems: RBI opens doors to private sector

Our Bureau. Mumbai | Updated on August 18, 2020

Releases framework; applications open till February 26

Paving the way for private entities to set up umbrella payment platforms to rival the National Payments Corporation of India, the Reserve Bank on Tuesday said interested players can submit applications till February 26, 2021.

Earlier, the central bank had proposed to allow a window of only three months for receiving applications. Under the final framework, however, a little more than six months have been given to submit applications, possibly taking into account the impact of Covid-19.

The RBI said that entities eligible to apply shall be owned and controlled by resident Indian citizens. They should have three years experience in the payments ecosystem as a payment system operator, payment service provider or technology service provider. The umbrella entity shall have a minimum paid-up capital of ₹500 crore. According to the RBI, no single promoter can have more than 40 per cent investment in the capital of the umbrella entity.

On the need for a new umbrella entity, AP Hota, former MD & CEO, NPCI, said: “While the volume of digital transactions might have gone up about five times in the last five years, the number of customers has grown only two times. How can the number of active digital customers be increased from 150 million to 500-600 million? This will require a great deal of effort.”

The umbrella entity is expected to set-up, manage and operate new payment system(s) in the retail space comprising, but not limited to ATMs, white label PoS, Aadhaar-based payments and remittance services, among others.

Further, it will operate clearing and settlement systems for participating banks and non-banks; identify and manage risks such as operational, settlement, credit, and liquidity and maintain the integrity of the system. The entity is expected to interact and be interoperable to the extent possible with the systems operated by the National Payments Corporation of India. NPCI is currently the sole umbrella organisation for operating retail payments and settlement systems in India.

The RBI also said the umbrella entity will have to start operations within six months, extendable to a maximum of one year, if required, from the date of in-principle approval.

“Scrutiny of applications will be undertaken by an external advisory committee. The EAC will submit its recommendations to the Reserve Bank of India. The board for regulation and supervision of payment and settlement systems (BPSS) will be the final authority on issuing authorisation for setting up umbrella entity or entities,” the apex bank said.



Published on August 18, 2020

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