News Excerpt
The Reserve Bank of India (RBI) recently released a framework for setting up of a pan-India new umbrella entity (NUE) for retail payments systems in the country including net and Aadhar-based payments and remittances as well as ATMs and point of sale payment services.

Pre-Connect
●    Currently, only the National Payments Corporation of India (NPCI), a not-for-profit company, performs this role.
●    The RBI’s move is a bid to reduce the risk of having just one player handling such a vast area of finance as the central banker is worried that this could lead to monopolistic behaviour.

Analytica
National Payments Corporation of India
    It is an umbrella organisation for operating retail payments and settlement systems in India.
    It is an initiative of Reserve Bank of India (RBI) and Indian Banks’ Association (IBA) under the provisions of the Payment and Settlement Systems Act, 2007.
    It is for creating a robust Payment & Settlement Infrastructure in India.
    The Company is focused on bringing innovations in the retail payment systems through the use of technology for achieving greater efficiency in operations and widening the reach of payment systems.
    The NUE is to be a company incorporated under the Companies Act, 2013 and may be a ‘for-profit’ or Non-profit company as decided by it.
    The formation of the umbrella entity has been authorized under the Payment and Settlement Systems Act, 2007.
    The entity will have minimum paid-up capital of Rs 500 crore with no single promoter group holding over 40% investment in the capital.
    The new entity will have to abide by corporate governance norms along with ‘fit and proper’ criteria for persons to be appointed on its board.

Working
    The umbrella entity will set up, manage and operate new payments systems in the retail space comprising ATMs, white label PoS, Aadhaar-based payments and remittance services.
    The entity will operate clearing and settlement systems for participating banks and non-banks, identify and manage relevant risks, monitor retail payments system developments and related issues in the country and internationally.
    It will be the responsibility of the entity to frame necessary rules and the related processes to ensure that the system is safe and sound, and that payments are exchanged efficiently.
    The entity will be permitted to participate in Reserve Bank’s payment and settlement systems, including having a current account with Reserve Bank, if required.
    The regulator can nominate a member to the board and will also have the right to approve appointment of directors as it does in the case of banks.
    It is expected to interact and be interoperable, to the extent possible, with the systems operated by NPCI.

Conclusion
The new umbrella entity assumes significance as it will challenge the monopoly of the National Payments Corporation of India (NPCI), with the central bank now looking to reduce concentration risks in the vast area of finance.