Reserve Bank Of India (RBI) on Tuesday published the framework for authorisation of pan-India Umbrella Entity for Retail Payment Systems. RBI in its draft circular said, “Such entity shall be a company incorporated in India under the Companies Act, 2013 and maybe a ‘for-profit’ or a Section 8 Company as may be decided by it,” and also the company will get authorised by RBI under section 4 of the Payment and Settlement Systems Act, 2007 (PSS Act).
Eligibility Criteria for the Promoters-
All type of entities which are owned and controlled by Resident Indian Citizens (as defined in the Foreign Exchange Management Act, 1999 (FEMA)) which has a 3 years’ experience in the payments ecosystem as Payment System Operator (PSO) / Payment Service Provider (PSP) / Technology Service Provider (TSP) are eligible to apply as promoter/promoter group for the umbrella entity. And any entity which holds more than 25% of the paid-up capital of the umbrella entity will be deemed to be a Promoter.
Reserve Bank of India (RBI) has issued a Fit and Proper Criteria for the Promoters / Promoter Groups of the New Umbrella Entity (NUE) which says, “Director of a Promoter Company / Group Company shall be deemed to be a “fit and proper” person if:
1. Such person has a record of fairness and integrity, including but not limited to –
- financial integrity;
- good reputation and character; and
2. Such person has not incurred any of the following disqualifications –
- Convicted by a court for any offence involving moral turpitude or any economic offence or any offence under the laws administered by the RBI;
- Declared insolvent and not discharged;
- An order, restraining, prohibiting or debarring the person from accessing/dealing in any financial system, passed by any regulatory authority, and the period specified in the order has not elapsed;
- Found to be of unsound mind by a court of competent jurisdiction and the finding is in force; and
- Is financially not sound.
3. If any question arises as to whether a person is a fit and proper person, the RBI’s decision on such question shall be final.”
New Umbrella Entity must have a minimum paid-up capital of Rs.500 Crores and no single Promoter / Promoter Group ought to have more than 40% investment in the capital of the umbrella entity.
The RBI wants that the Promoters / Promoter Groups shall upfront demonstrate the capital contribution of not less than 10% i.e., Rs.50 crores at the time of making an application for setting up the umbrella entity. The balance capital shall be secured at the time of commencement of business/operations.
The Promoter / Promoter Group shareholding can be diluted to a minimum of 25% after 5 years of the commencement of business of the umbrella entity. A minimum net-worth of Rs.300 crores shall be maintained at all times.
NUE’s area of work-
- Set-up, manage and operate new payment system(s) in the retail space comprising of but not limited to ATMs, White Label PoS; Aadhaar based payments and remittance services; newer payment methods, standards and technologies; monitor related issues in the country and internationally; take care of developmental objectives like enhancement of awareness about the payment systems.
- 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.
- Fulfill its policy objectives and ensure that principles of fairness, equity and competitive neutrality are applied in determining participation in the system; frame necessary rules and the related processes to ensure that the system is safe and sound and that payments are exchanged efficiently.
- Carry on any other business as suitable to further strengthen the retail payments ecosystem in the country. It is expected that the umbrella entity shall offer innovative payment systems to include hitherto excluded cross-sections of the society and which enhance access, customer convenience and safety and the same shall be distinct yet interoperable.
- It is also expected to interact and be interoperable, to the extent possible, with the systems operated by NPCI.
- The umbrella entity may be permitted to participate in Reserve Bank’s payment and settlement systems, including having a current account with Reserve Bank, if required.
How to apply?
An application should be submitted in an envelope superscribed “Application for Umbrella Entity ” in the prescribed form (Form A) till February 26, 2021, to the Chief General Manager of Reserve Bank of India.
And after the last date of receipt of applications, only the application will be processed further and scrutiny of applications will be undertaken by an External Advisory Committee (EAC). The EAC will submit its recommendations to RBI and after that Board for Regulation and Supervision of Payment and Settlement Systems (BPSS) will issue the authorisation for setting up umbrella entity. The whole process is expected to be completed within a period of six months by the Reserve Bank of India.
With Warm Regards,