The New Umbrella Entity (NUE) which the Reserve Bank of India (RBI) had accepted applications for in March 2021 is delayed, but the plan is still on, clarified Governor Shaktikanta Das.
After applications poured in from consortiums comprised of top conglomerates, payments players and banks, RBI has shared no updates on the evaluation of the applicants.
"I agree there has been some delay on that. That is primarily because the same officials who are dealing with that issue (NUE) are preoccupied with other works. We are evaluating it," said Das in his interaction with the media after the monetary policy announcement.
The NUE, like the NPCI is supposed to be responsible for setting up, managing and operating new retail digital payment systems. It will also manage clearing and settlement systems and undertake initatives to strengthen the digital payments ecosystem in the country. The RBI has received applications from around six consortiums for setting up the entity.
The first consortium includes Facebook, Google, SoHum Bharat along with Jio Platforms. The Tata Group, too, is leading a consortium with Kotak Mahindra Bank, HDFC Bank, Airtel Digital, Flipkart, Mastercard and PayU.
The third consortium includes e-commerce giant Amazon, with ICICI Bank, Axis Bank, Visa, Pine Labs and BillDesk. Paytm CEO Vijay Shekhar Sharma had confirmed that the payments player is also in the fray with Ola Financial, Policybazaar, IndusInd Bank, among others.
However, there have been a few concerns around the data storage and localisation norms, besides the lack of clarity on what revenue model will the new entity have.
NPCI functions as a not-for-profit organisation and both the Unified Payments Interface (UPI) and RuPay debit cards attract Zero-MDR as per government norms, i.e. banks, payment service providers, UPI players and NPCI do not earn any share from transactions through these modes.
A competing entity charging MDR for any different products may not be able to compete, and will have to adhere to the Zero-MDR norm if it decides to share the load of UPI transactions, according to industry sources.
"There is still some clarity needed on the revenue model. If there is no revenue, how will there be competition? Plus, there are concerns around the data security and storage norms. So that is why there has been a delay, these questions are on the minds of the regulator as well as applicants," said a source within the banking industry on the condition of anonymity.
According to the draft framework by the RBI, the NUE shall have a minimum paid-up capital of Rs 500 crore and no single promoter or promoter group shall have more than 40 percent investment in the capital of the NUE. A minimum net worth of Rs 300 crore shall be maintained by the entity at all times.