State Bank of India (SBI) is planning to foray into digital payments by setting up an entity under the Reserve Bank of India’s New Umbrella Entity (NUE) framework for retail payments. As per a research report, digital payments in India are expected to grow over three-fold to Rs 7,092 trillion by 2025.
The RBI recently released a framework to set up a pan-India umbrella entity focussing on retail payment systems. Such an entity will be a company incorporated in India under the Companies Act 2013, and may be a ‘for-profit’ or a Section 8 company as may be decided by it, the RBI said.
SBI's venture will counter the National Payments Corporation of India (NPCI). NPCI is a retail payments entity that supports UPI, IMPS, RuPay cards, ATM transactions and others.
As per an Economic Times' report, the public sector bank's senior management has already held preliminary discussions.
Also read: Digital payments market in India likely to grow 3-folds to Rs 7,092 trillion by 2025: Report
"SBI is examining the possibility of applying for a licence under the RBI's New Umbrella Entity (NUE) framework," ET reported, quoting an SBI official.
Under the NUE framework, entities that receive approval can set up a payments company for owning and operating a pan-India digital payments network, exercising the same powers as NPCI.
The SBI spokesperson told ET that it is "examining" the NUE framework, adding that the bank could leverage its scale, massive customer base and existing capabilities to offer new digital services.
Moneycontrol could not independently verify the report.
If given a green signal, SBI will need a minimum paid-up capital of Rs 500 crore. Out of this, Rs 50 crore will have to be brought at the time of application and a constant paid-up capital of Rs 300 crore will have to be maintained at all times, as per RBI guidelines.
SBI's entity has to be interoperable with NPCI, as per the guidelines.
The RBI has mandated interoperability between NPCI and new players so that consumers are not affected and instead will have more choices.
Also read: Explained: Why RBI is pushing for new umbrella entities for retail payments, who can set them up and other questions answered
Aspirants can apply to set up an umbrella entity till February 26, 2021.
Notably, RedSeer Consulting, in its latest research report, said that India's digital payment market was worth around Rs 2,162 trillion in 2019-20.
"The current 160 million unique mobile payment users will multiply by 5 times to reach nearly 800 million by 2025. This growth will be driven by a number of demand and supply-side drivers," the Bengaluru-based management consultancy said.
According to the report, the payment gateway aggregator market in India, which is currently estimated to be at Rs 9.5 trillion, is expected to grow by 2.4 times driven by large value transactions. It is expected to grow at a compounded annual growth rate of 19 percent in the next 5 years to reach Rs 22.6 trillion by FY 2025.