NPCI likely to spin off BHIM into a subsidiary, appoints Lalitha Nataraj as CEO: Report

In 2021, it created NPCI Bharat BillPay Limited, a separate subsidiary, to manage the Bharat Bill Payment System.

The National Payments Corporation of India (NPCI) is likely to transform its Bharat Interface for Money (BHIM) app into a standalone subsidiary as part of efforts to enhance its footprint in the country's digital payments landscape, according to industry sources cited by Business Standard.

Lalitha Nataraj, formerly associated with IDFC FIRST Bank and ICICI Bank, has been appointed as the Chief Executive Officer (CEO) of the newly formed subsidiary, the report states.

"The plan is to establish BHIM as a separate entity with a renewed focus on expanding its reach as a payments application," an industry insider told Business Standard. The move has garnered support from both the government and the Reserve Bank of India (RBI), who are keen on promoting the app's growth.

The NPCI has yet to respond to queries regarding the development, and Moneycontrol did not independently verify the report.

This strategic decision is seen as the NPCI's attempt to address the concentration risk in India’s Unified Payments Interface (UPI) market. Presently, Walmart-backed PhonePe and Google Pay dominate the market, processing approximately 85 percent of UPI transactions in the country. In contrast, BHIM's market share remains marginal, handling just 22.72 million transactions in June, a mere 0.16 percent of total UPI volumes.

An industry source shared with BS the need for diversification in the UPI ecosystem. "The idea is to reduce reliance on two American companies. If others aren't stepping up, why not strengthen the NPCI’s own brand?"

The BHIM app, which was launched by Prime Minister Narendra Modi in 2016, is also reportedly undergoing a revamp. Although the new subsidiary will continue to operate under the NPCI brand, there may be some changes in its operational structure. "All financials are reported within NPCI. Once BHIM becomes a separate company, it will have its own balance sheets, cost structure, and other financial considerations," the source said.

This is not the first instance of the NPCI spinning off its operations into a new entity. In 2021, it created NPCI Bharat BillPay Limited, a separate subsidiary, to manage the Bharat Bill Payment System.