RBI releases framework for operating pan-India retail payments systems, invites applications from companies

New Delhi: The Reserve Bank on Tuesday unveiled the framework for setting up umbrella entities for operating pan-India retail payments systems and invited applications from eligible companies by February 26, 2021.

“Reserve Bank has today placed on its website, the ‘framework for authorisation of pan-India Umbrella Entity for Retail Payments’. The framework has been released after due deliberations on the comments / feedback received on the ‘draft framework for authorisation of a pan-India New Umbrella Entity for Retail Payment Systems’ which was placed on Reserve Bank’s website on February 10, 2020 inviting public comments,” RBI said in a statement.

“The Reserve Bank invites applications for the umbrella entity which shall be submitted in the prescribed form (Form A) till the close of business on February 26, 2021,” RBI said.

As per the framework, the companies with a net worth of over Rs 500 crore will be eligible to set up an umbrella entity which among other things will be permitted to set up, manage and operate new payment systems in the retail space comprising ATMs, White Label PoS, Aadhaar-based payments and remittance services. The entities will develop new 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.

The scope of activities will also include operate clearing and settlement systems; 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.

Among other things, the umbrella entity will be permitted to operate clearing and settlement systems for banks and non-banks; identify and manage relevant risks such as settlement, credit, liquidity and operational; and preserve the integrity of the system.

It will also be expected to 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 and/or the economy in general, the RBI said.

In case of any foreign direct investment in the applicant entity, it will have to fulfil, additionally, the capital requirements as applicable under FEMA (Foreign Exchange Management Act), and necessary approval from the competent authority.

The guidelines also elaborate on the ‘fit and proper’ requirements for promoters/promoter groups.

“The umbrella entity shall have a minimum paid-up capital of Rs 500 crore. No single promoter/promoter group shall have more than 40 per cent investment in the capital of the umbrella entity,” the guidelines said.

The promoters or promoter groups should upfront demonstrate the capital contribution of not less than 10 per cent — Rs 50 crore — at the time of making application for setting up the umbrella entity.

The balance capital will be secured at the time of commencement of business/operations.

It further said the promoter/promoter group shareholding can be diluted to a minimum of 25 per cent after 5 years of commencement of business of the umbrella entity.

However, a minimum net worth of Rs 300 crore should be maintained at all times, as per the guidelines.