Money & Banking

Umbrella entity for retail payments: Race for licence gathers momentum

Surabhi Mumbai | Updated on February 26, 2021

Even as the Reserve Bank of India extended the timeline to apply for a licence as a pan-India umbrella entity for retail payments to March 31,at least four to five consortiums of banks, fintechs and companies are drawing up plans to compete with the National Payments Corporation of India

“Requests have been received from various stakeholders, including Indian Banks’ Association, for extending the timeline, keeping in view the Covid-19-related disruptions and inconveniences. It has been accordingly decided to extend the timeline for making the application up to March 31, 2021,” the RBI said on Friday.

The RBI had earlier set February 26 as the last date for submitting applications.

Industry sources welcomed the extension, and said it would enable at least three to four more players to apply for the licence.

“This is more than ample time. Many players are still finalising plans, and now they, too, will be able to apply,” noted a source.

As of now, at least some players have started indicating their plans.

On Thursday, two leading private sector banks – Kotak Mahindra Bank and HDFC Bank – outlined investment plans in Ferbine Private Limited, which is promoted by Tata Sons Private Ltd, and was incorporated on January 18to make an application to the RBI for the PUE licence.

While HDFC Bank said it has executed an agreement for subscribing to 4,995 equity shares of the face value of ₹10 each fully paid-up issued by Ferbine, Kotak Mahindra Bank said it has picked up a 9.99 per cent stake in the company.

Earlier, So Hum Bharat Digital Payments had announced that it is in talks with private sector lender YES Bank for a 9.99 per cent equity investment and will work together on the proposed new umbrella entity (NUE).

At least, half a dozen more banks, corporates and fintechs are also finalising plans to apply for NUEs.

Private banks

While State Bank of India has been eyeing a licence and has been working out plans to apply to the RBI, private sector banks, including ICICI Bank and Axis Bank, are also understood to be working as a consortium are also understood to be readying plans.

Reliance Industries, through Reliance Jio Infocomm, is also working on similar plans to apply for an NUE, according to sources.

Fintechs and payment companies too are understood to be working with some of the banks as part of the consortium.

Email queries sent by BusinessLine to SBI, ICICI Bank, Axis Bank and Reliance on the issue did not elicit a response.

The RBI had, on August 18, 2020, released the framework for the umbrella entity for retail payments. It aims to help entities to set-up, manage and operate new payment systems in the retail space through means such as ATMs, White Label PoS; Aadhaar based payments and remittance services; newer payment methods, standards and technologies; and also operate clearing and settlement systems for participating banks and non-banks.

The guidelines also said the umbrella entity shall have a minimum paid-up capital of ₹500 crore and no single Promoter or Promoter Group shall have more than 40 per cent investment in the capital of the umbrella entity.

Published on February 26, 2021

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