Page 35 - Banking Finance June 2022

ARTICLE

relevant risks such as settlement, credit, liquidity and
operational and preserve the integrity of the system.

Carry on any other business as suitable to further
strengthen the retail payments ecosystem in the
country. It is expected that the umbrella entity shall
offer innovative payment systems to include hitherto
excluded cross-sections of the society and which
enhance access, customer convenience and safety and
the same shall be distinct yet interoperable.
It is also expected to interact and be interoperable, to
the extent possible, with the systems operated by NPCI.
promoter group of the umbrella entity shall be owned and
Fulfill its policy objectives and ensure that principles of
controlled by resident Indian citizens' with 3 years'
fairness, equity and competitive neutrality are applied
experience in the payments ecosystem as Payment System
in determining participation in the system; frame
Operator (PSO) / Payment Service Provider (PSP) / necessary rules and the related processes to ensure that
Technology Service Provider (TSP)2. the system is safe and sound, and that payments are
exchanged efficiently.
The shareholding pattern shall be diversified. Any entity
holding more than 25% of the paid-up capital of the umbrella Going forward:
entity shall be deemed to be a Promoter. The umbrella entity
The apparent benefits of introducing another pan-India UE,
shall have a minimum paid-up capital of Rs. 500 crore. No
as envisaged in the Framework, focusing on retail payment
single Promoter / Promoter Group shall have more than 40%
systems are multi-fold. The first, and perhaps the most
investment in the capital of the umbrella entity. The
apparent intent is to bring in competition from non-banking
Promoters / Promoter Groups shall upfront demonstrate
players in a market which presently has a sole player backed
capital contribution of not less than 10% i.e., Rs. 50 crore
by only banking entities. With the introduction of such non-
at the time of making an application for setting up of the
banking entities in the proposed UE, the non-banking
umbrella entity. The balance capital shall be secured at the
entities may introduce their indigenous system for payments
time of commencement of business / operations. The
over NPCI products, with MobiKwik already showing interest,
Promoter / Promoter Group shareholding can be diluted to
along with PSOs and TSPs like Billdesk and RazorPay.
a minimum of 25% after 5 years of the commencement of
Additionally, it is expected that introducing more UEs can
business of the umbrella entity. A minimum net-worth of Rs.
address the risks relating to concentration, which would, in
300 crore shall be maintained at all times.
turn, contribute to the country's financial stability.
What would be the scope of their The RBI's attempt to invigorate the retail payment system
is commendable yet retains some creases which need to be
activity?
ironed out for smoothly transitioning to a multi-player
Set-up, manage and operate new payment system(s)
system. The stated objective of this umbrella entity would
in the retail space comprising of but not limited to ATMs,
be inter alia for the setting-up, management, and operation
White Label PoS; Aadhaar based payments and
of new retail payment systems which is clearly seen in
remittance services; newer payment methods,
Section H of the Framework. Therefore, as the Framework
standards and technologies; monitor related issues in
does not provide for any mechanism on governing the
the country and internationally; take care of
existing payment systems, it is clear that the NPCI
developmental objectives like enhancement of
deservingly gets to retain control over its own products yet
awareness about the payment systems.
shall lose monopoly over the retail payment ecosystem.
They will operate clearing and settlement systems for However, it is unclear as to how the NPCI and the UEs would
participating banks and non-banks; identify and manage co-exist.
BANKING FINANCE | JUNE | 2022 | 35