RBI unveils framework for retail payments entity

News: Reserve Bank of India(RBI) has released a ‘Framework for Authorisation of Pan-India Umbrella Entity for Retail Payments’.

Facts:

  • In February 2020, RBI had proposed to create an alternative umbrella organisation for retail payments to prevent the monopoly of National Payment Corporation of India(NPCI).

About the Framework:

  • New umbrella entity(NUE): It shall be a company incorporated under the Companies Act, 2013 and may be a ‘for-profit’ or Non-profit company as decided by it.
  • Paid up capital: The entity will have minimum paid-up capital of Rs 500 crore with no single promoter group holding over 40% investment in the capital.
  • Functions:
    • It can set up, manage and operate new payments systems in the retail space comprising ATMs, white label PoS, Aadhaar-based payments and remittance services.
    • It will manage clearing and settlement systems for participating banks and non-banks and also monitor developments in the retail payment system both in India and abroad.
    • It will frame necessary rules and the related processes to ensure that the system is safe and sound and that payments are exchanged efficiently. 
  • Corporate Governance: The entity has to follow corporate governance norms set by the RBI, the central bank retains the right to approve the appointment of directors and nominate a member on the entities’ board.

Additional Facts:

  • NPCI: It is an umbrella organisation for operating retail payments and settlement systems in India.
  • It is an initiative of Reserve Bank of India (RBI) and Indian Banks Association (IBA) under the provisions of the Payment and Settlement Systems Act, 2007.
  • It has been incorporated as a Not for Profit Company under the provisions of Section 25 of Companies Act 1956 (now Section 8 of Companies Act 2013).
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