The new rival for NPCI is in the making. What is the New Umbrella Entity (NUE) and why is the RBI pushing for it?
What’s ‘NUE’?
After initially setting the deadline as February 26, 2021, the Reserve Bank of India (RBI) has now extended the deadline for submitting the application for the pan-India Umbrella Entity till March 31, 2021, reasoning it to COVID-related disruptions and inconveniences.
In August 2020, the regulator had released the framework for authorization of pan-India Umbrella Entity for Retail Payments and given six months for the applicants to file their submissions. In the framework, the RBI announced the scope of NUE.
A New Umbrella Entity (NUE) for retail payments will be tasked with setting up, managing, and operating new payment systems in the retail space including ATMs, PoS, Aadhaar-based payments and remittance services. Unlike NPCI which was set as a ‘Not for Profit’ company, the RBI has said that the NUE may operate as a ‘for-profit’ organization.
RBI guidelines mandate that applicants have at least three years of experience in the payments space, and a minimum paid-up capital of ₹500 crore to be eligible to apply. No single promoter is allowed to have more than 40% investment in the capital. The entity would also have to maintain a minimum net-worth of ₹300 crore at all times.
A ‘NUE’ rival
The RBI’s objective to push for the NUE is to reduce the dominance of the National Payments Corporation of India (NPCI) and for the NUE to act as a competitor to the NPCI which has been the sole umbrella body to facilitate retail payments. The NUE is also intended to help with the big shift to a digital and cashless economy.
In a 2019 policy paper on retail payment systems in India, the central bank had called for opening up the sector to encourage competition and innovation as it said it was concerned with a few entities in the payments space having become too big.
‘NUE’ applicants
As per various news reports, Reliance has partnered with Google and Facebook to set up an NUE. Consortiums led by ICICI Bank and Amazon, as well as Paytm with IndusInd Bank has also applied for NUE licences. Another consortium led by Tata Group along with HDFC Bank and Kotak Mahindra Bank is also on the list.
Big companies as mentioned are in the race to get an NUE licence and set up an entity that will allow them to create a payments’ network similar to the Unified Payments Interface (UPI). The competition is high as India has been fast in adapting to the digital payments’ world especially amid the pandemic, and who wouldn’t want to gain a share of that market.
NPCI will have to gear up to stand in the competition while the NUE will have to come up with innovation, mechanism and offer new choices to strengthen the retail payments space in the country.
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