In Boost For Start-Ups, RBI Plans Alternative Retail Payments System

India's central bank has proposed a draft framework to set up an alternative digital retail payments entity, along the lines of the not-for-profit NPCI.

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In a further boost to the burgeoning fintech start-up space in India, the Reserve Bank of India (RBI) has proposed a draft framework to set up a new pan-India umbrella entity for retail payments systems. The entity will set up, manage and operate new payment systems, especially in the retail space, RBI said in a notification.


These new systems will include but are not limited to "ATMs, White Label PoS, Aadhar-based payments and remittance services". The entity would be responsible for developing new payment methods, standards and technologies, monitor related issues both inside and outside the country and take care of developmental objectives such as improving awareness about payment systems.

The NPCI has been in focus in recent times due to the popularity of its flagship unified payments interface (UPI). The success of UPI has brought cheers from both inside the country and abroad.

The Guidelines

According to the draft regulations, the entity could either be for-profit or a not-for-profit but has to be owned and operated by Indian residents. It will be incorporated under the Companies Act, 2013.

Those eligible to apply as promoter or as the promoter group for the entity need to be owned and controlled by Indian residents, must have at least three years experience in the payments ecosystem as a payment system operator, payment service provider or a technology service provider.

The shareholding pattern will be diversified, with anyone holding more than 25 per cent of the paid-up capital of the entity being deemed a promoter, the RBI said. Minimum paid up capital should be INR 500 crore while a minimum net worth of INR 300 crore must be maintained at all times. The promoters have to show an upfront capital contribution of at least 10 per cent (INR 50 crore).

To avoid anyone controlling the entity, no single promoter can hold more than 40 per cent. After a period of five years, the promoter's shareholding would be diluted to a minimum of 25 per cent.

The entity would have a board to comply with corporate governance rules while the central bank would have the right to appoint directors to the board as well as nominate a member.

According to the guidelines, those applying must have a record of fairness and integrity, and should not have been convicted by a court for any offence involving morally wrong behavior, any economic offence or other offence under laws administered by the RBI.

The applications can be submitted in the next three months. Scrutiny of applications will be undertaken by an external advisory committee, which will submit its recommendations to the central bank. The Board for Regulation and Supervision of Payment and Settlement Systems will be the final authority for issuing any authorisation.

The RBI said it seeks to complete the process within a period of six months.