RBI frames rules for starting NPCI rivals

Applicants must have at least three years of experience in the payments ecosystem, the central bank said

RBI frames rules for starting NPCI rivals


Any new umbrella organization for retail payments on the lines of the National Payments Corp. of India (NPCI) must have a minimum paid-up capital of ₹500 crore and strive for inter-operability with NPCI systems, the Reserve Bank of India said.

Such organizations are expected to challenge the monopoly of NPCI, which was floated by the RBI and the Indian Banks’ Association (IBA) in 2008. In February, the RBI had released draft guidelines for such organizations, looking to reduce concentration risks in the space dominated by NPCI.

In its “framework for authorisation of pan-India umbrella entity for retail payments", the central bank Tuesday said no single promoter or promoter group should have more than 40% investment in the capital of this entity. It also said the promoter “can" bring down shareholding in the entity to a minimum of 25% after five years, in a seeming dilution from its draft guidelines which made such dilution mandatory.

A person aware of the development said the reason for changing it from mandatory to voluntary is to make it more inclusive at a time when covid-19 has made capital scarce. “The situation between February and now has changed, and the change in language is to ensure potential applicants are not hamstrung by this criterion," this person said on condition of anonymity.

Applicants must also have at least three years of experience in the payments ecosystem.

“The promoters or promoter groups shall upfront demonstrate capital contribution of not less than 10% or ₹50 crore at the time of making an application for setting up of the umbrella entity," it said.

NPCI was incorporated as a not-for-profit company under the provisions of the Companies Act to provide infrastructure to the entire banking system in India. The 10 core promoter banks are SBI, Punjab National Bank, Canara Bank, Bank of Baroda, Union Bank of India, Bank of India, ICICI Bank, HDFC Bank, Citibank and HSBC.

Under the terms set out by the central bank, the scope of activities of this umbrella entity will be to set up, manage and operate new payment systems in the retail space. It will also have to operate clearing and settlement systems for participating banks and non-banks, and is also expected to interact and be interoperable, to the extent possible, with the systems operated by NPCI.