RBI proposes setting up an alternative retail payments system in India

The RBI said that the new umbrella entity will set-up, manage, and operate new payment systems in the country, and also develop newer payment methods, among other things.

The Reserve Bank of India (RBI) has taken a step towards setting up a pan-India ‘new umbrella entity’ (NUE), focussing on retail payment systems in the country. The central bank has floated a draft framework inviting comments from stakeholders on the same.

According to the proposed draft, the NUE will have a minimum paid-up capital of Rs 500 crore to support and address the need of capital for managing risks, and invest in technological infrastructure for business operations, etc.

The RBI also said that no single promoter (or group) shall have more than 40 percent investment in the capital of the NUE.

Further, promoters of the NUE will have to upfront demonstrate the capital contribution of at least 10 percent which is pegged at Rs 50 crore, at the time of making an application for setting up of the NUE, and a minimum net-worth of Rs 300 crore shall be maintained at all times.

Speaking on the governance structure of the NUE, the RBI said, “The NUE shall conform to the norms of corporate governance along with ‘fit and proper’ criteria for persons to be appointed on its Board. The Reserve Bank retains the right to approve the appointment of Directors as also to nominate a member on the Board of the NUE.”

The RBI also said that the scope of activities for the NUE shall be to set up, manage, and operate new payment system(s), especially in the retail space, and also develop new payment methods, standards, and technologies, monitor related issues in the country and internationally, while taking care of developmental objectives like enhancement of awareness about the payment systems.

The entity is also expected to fulfil its policy objectives and ensure that principles of fairness, equity, and competitive neutrality are applied in determining participation in the system.

(Edited by Suman Singh)