New Umbrella Entity : The NPCI Rival
First understand What the NUE is?
As per Draft framework released by RBI , NUE (New Umbrella Entity) for retail payment system is a company incorporated under companies act and authorised by RBI under Payment and Settlement Act.
Why NUE?
As of now, the government-owned National Payments Corporation of India (NPCI) is the sole umbrella body to facilitate retail payments which owns and operates the UPI Interface, the RuPay network etc. for settlement. But, the RBI feel that NPCI alone won’t be able to carry out all the volume of transactions in the retail segment and Government also feel that monopoly in this sector can be harmful. So, NUE will offer competition to NPCI and offer similar product like UPI and other payment modes.
Steps taken by RBI for NUE
The central bank Reserve Bank of India had released the framework for the authorisation of NUEs on August 18, 2020. Since then, many Private players in the Indian banking and payments landscape have formed consortium for planning different business structure, technology and security. The Last date for application for NUE was 26-feb-2021, which is now extended till 31-Mar-2021.
Eligibility Criteria set by RBI
The entity eligible to apply as promoter / promoter group for the NUE shall be ‘owned and controlled by residents’ with 3 years’ experience in the payments ecosystem. Any entity holding more than 25% of the paid-up capital of the NUE shall be deemed to be a Promoter. The NUE shall have a minimum paid-up capital of Rs.500 crore (to support / address the need of capital for managing risks, invest in technological infrastructure, for business operations, etc.). No single promoter / promoter group shall have more than 40% investment in the capital of the NUE.
NUE : Scope of Activity
1. Set-up, manage and operate new payment system(s) especially in the retail space and develop new payment methods, standards and technologies;monitor related issues in the country and internationally; take care of developmental objectives like enhancement of awareness about the payment systems.
2. Operate clearing and settlement systems; identify and manage relevant risks such as settlement, credit, liquidity and operational and preserve the integrity of the system(s);monitor retail payment system developments and related issues in the country and internationally to avoid shocks, frauds and contagions that may adversely affect the system(s) and / or the economy in general.
2. Operate clearing and settlement systems; identify and manage relevant risks such as settlement, credit, liquidity and operational and preserve the integrity of the system(s);monitor retail payment system developments and related issues in the country and internationally to avoid shocks, frauds and contagions that may adversely affect the system(s) and / or the economy in general.
List of Applications received by RBI so far :
1. Amazon - The consortium includes Axis Bank, ICICI Bank, Visa and also includes Indian merchant payments unicorn Pine Labs and Indian online payment gateway Billdesk.
2. Paytm & Ola - Both Indian unicorns also joined hands with Indusland Bank and Non-bank lender Centrum Finance, Zeta Pay and Electronic Payment and Services (EPS), are also expected to be part of the group.
3. Tata Group - Tata group along with its subsidiary Ferbine Pvt. Ltd. is expected to hold the majority stake in NUE. This consortium also includes Airtel Digital, HDFC Bank, Kotak Mahindra Bank for 10% each and Mastercard and Nasper-backed PayU are also part of the consortium.
4. So Hum Bharat - A company promoted by payment industry veteran Mr. Naveen Surya and Chairman of PCI(Payment Corporation of India) Vishwas Patel, So Hum Bharat Digital Payment System also apply for the NUE License. So Hum Bharat is is a wholly-owned subsidiary of the BSE-listed financial technology company Infibeam Avenues, where Vishwas Patel is also executive director of Infibeam Avenues. As per ET, Jio Payment, Google and Facebook also pick up stake in So Hum Bharat. In December last year, it was reported that Yes Bank was in talks with So Hum Bharat to pick up a 9.99% stake in the company.
NUEs are not only competitors of NPCI, but also helps to innovate India's Retail Payment System. The whole system also work with interoperability and increase the adoption of cashless payment system.
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