RBI Allows Private Sector In Retail Payments – Free PDF Download

What is Retail payment system?

• Retail payments usually involve transactions between two consumers, between consumers and businesses, or between two businesses.
• Although there is no definitive division between retail and wholesale payments,
• Retail payment systems generally have higher transaction volumes and lower average values than wholesale payment systems.

National payment corporation of India

• NPCI, a ‘not-for-profit’ entity registered under section 8 of Companies Act, is owned by a consortium of leading public and private sector banks.
• It is directly responsible for functioning of highly important digital payment channels such as Unified Payment Interface, NACH, National Financial Switch (NFS) and IMPS.
• The NPCI, set up in 2008, currently dominates the retail payments space and operates more than 12 such platforms.
• Established by RBI & IBA.

• The RBI, in February last year, had proposed to create an alternative umbrella organisation for retail payments to prevent monopoly and concentration risk.
• In a policy paper, the central bank had suggested that the NPCI became ‘too big to fail’.

• The Reserve Bank of India has issued final guidelines for a new umbrella entity for retail payments systems, which will have an option to operate as a “for-profit” entity.

Who can apply?

• Payments system operators, and payments and technology service providers
• With three years of experience are eligible to apply and set up the new pan-India platform.
• The last date to apply for a licence is Feb. 26, 2021.

What RBI expect from new entity?

• It’s expected that the [new] umbrella entity shall offer innovative payment systems,
• To include hitherto excluded cross-sections of the society, and which enhances access, customer convenience and safety, and the same shall be distinct yet interoperable.

What the new entity can do?

• The alternative umbrella entity can set-up, manage and operate new retail payment systems related to- Automated-teller-machines, white-label point-of-sale devices, Aadhaar-based payments and remittances services.

Will it replace NPCI?

• Any retail payments solutions created by the new umbrella entity or entities should interact and be interoperable with existing systems operated by the National Payments Corporation of India, the RBI said.
• That means the new entity will compete on developing new retail payments technology and not necessarily replace payments platforms operated by the incumbent.

Ownership Rules

• The minimum paid-up capital of the entity has been set at Rs 500 crore and a minimum net worth of Rs 300 crore has to be maintained at all times.
• The promoter should be owned and controlled by resident Indians.
• No single promoter can invest more than 40% of the paid-up capital.
• While the umbrella entity has to follow corporate governance norms set by the RBI,
• The central bank retains the right to approve the appointment of directors and nominate a member on the entities’ board.

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