The Reserve Bank of India (RBI) has come up with a framework for pan-India Umbrella Entity for Retail Payments, wherein the central bank has said that an entity must have a minimum paid-up capital of Rs 500 crore for setting up an umbrella entity for retail payments.
As per reports, the idea is to establish an entity that will focus on retail payments on the lines of what the National Payments Council of India (NPCI) does. NPCI was formed by the RBI and the Indian Banks’ Association (IBA) in 2008 in a bid to provide infrastructure to the entire banking system in India. The new entity is expected to do the same for retail payments in India.
The RBI notification said that the objective of the framework is to set up pan-India umbrella entity or entities focussing on retail payment systems.
Retail payments are transactions that take place between consumers and businesses such as cash payments at stores, online payments, etc.
"Such entity shall 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," it said.
It said that the umbrella entity shall have a minimum paid-up capital of Rs 500 crore.
This umbrella entity will be responsible to set-up, manage and operate new payment systems in the retail space comprising of but not limited to ATMs, Point of Sale (PoS) systems, Aadhaar based payments and remittance services.
This entity can also set up newer payment methods, standards and technologies and also monitor related issues in the country and internationally. The entity will also be responsible to frame necessary rules and the related processes to ensure that payment systems are safe and sound, and that payments are exchanged efficiently.
It is also expected to interact and be interoperable, to the extent possible, with the systems operated by NPCI.
“Operate clearing and settlement systems for participating banks and non-banks; identify and manage relevant risks such as settlement, credit, liquidity and operational and preserve the integrity of the system(s); monitor retail payment system developments and related issues in the country and internationally to avoid shocks, frauds and contagions that may adversely affect the system(s) and / or the economy in general,” RBI stated in the entity’s scope of activities.
No single promoter or promoter group shall have more than 40% investment in the capital of the umbrella entity.
"The promoters/promoter groups shall upfront demonstrate capital contribution of not less than 10%, i.e., Rs 50 crore at the time of making an application for setting up of the umbrella entity," it said, adding that the balance capital shall be secured at the time of commencement of business or operations.
The promoter shareholding can be diluted to a minimum of 25% after five years of the commencement of business of the umbrella entity and a minimum net worth of Rs 300 crore shall be maintained at all times.
The RBI said that the umbrella entity shall conform to the norms of corporate governance along with 'fit and proper' criteria for persons to be appointed on its board.
The guidelines said that the RBI retains the right to approve the appointment of directors as also to nominate a member on the board of the umbrella entity.
The apex bank has sought applications from the interested parties by the close of business hours on February 26, 2021. The Reserve Bank will endeavour to complete the process within a period of six months, it said.
With IANS inputs