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Framework for Authorisation of Pan-India Umbrella Entity for Retail Payments

20 Aug 2020

The RBI has invited applications from payment system operators, payment service providers and technology service providers to set up, manage and operate new payment systems in the retail space.

The Reserve Bank of India (RBI) has been reviewing the ecosystem for payment systems in India, which is currently dominated by the National Payments Corporation of India (NPCI). The NPCI currently operates a large number of highly used payment systems including UPI, IMPS, CTS, BHIM, RuPay, NETC, BharatQR and AePS. In order to minimise risks such as single point failure, lack of innovation and monopolistic trends that are likely to arise from this concentration of operations, the RBI decided to encourage participation in the retail payments space.

In this context, the RBI published a Draft Framework for Authorisation of Pan-India New Umbrella Entity for Retail Payments (Draft Framework) on 10 February 2020, with an objective to establish new umbrella entity/entities (Umbrella Entity) to set up, manage and operate new payment systems in the retail space. The Draft Framework outlined the scope of activities to be carried out by an Umbrella Entity and provided the requirements to be fulfilled by applicant entities.

The RBI invited comments from the public on the Draft Framework and following deliberations on the feedback received, it issued the final Framework for Authorisation of Pan-India Umbrella Entity for Retail Payments (Framework) on 18 August 2020. Notable changes from the Draft Framework include (i) an expansion of the scope of activities to include interoperability with the NPCI, and the adoption of measures to enhance inclusivity, access, convenience, interoperability and safety, and (ii) a requirement for the applicant to commence operations within 6 to 12 months of receiving ‘in principle’ approval from the RBI.

  • Scope of Activities of an Umbrella Entity

    Umbrella Entities must be incorporated in India under the Companies Act, 2013, either as a for-profit or a non-profit company and will be authorised by the RBI under the Payment and Settlement Systems Act, 2007. They will perform the following activities:

    • setting up, managing and operating new payment systems in the retail space, monitoring related issues globally, and ensuring the development of these systems;
    • operating clearing and settlement systems for participating financial institutions, and identifying and managing related risks such as settlement, credit and liquidity;
    • ensuring fairness, equity and competitive neutrality in determining participation in the system, safety of the system and efficient payments exchange;
    • carrying out other activities to foster the retail payments ecosystem in India, such as enhancing inclusivity, access, convenience, interoperability and safety;
    • maintaining interoperability with the systems operated by the NPCI; and
    • participating in the RBI’s payment and settlement systems as required.
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