RBI’s checks and balances: Barriers to new NPCI-like umbrella entity for pan-India retail payments

Last year, the Reserve Bank of India (RBI) came out with a licensing framework to establish several payment processing companies. The idea was to create another type of institution for the National Payment Corporation of India (NPCI) to expand sales payments and promote innovation in the financial system. While NPCI has established a game-changing payment infrastructure such as UPI, which is global, the retail business has also become a ‘huge failure’ center, and any IT outbreak or cyber attack could stop all payment systems in the country.

Submit new RBI procedures, many major players under contract have used the license. These partners include names like Facebook, Google, Amazon, ICICI Bank, Tatas, Kotak, HDFC Bank, Flipkart, PayU Axis Bank, Visa, Pine Labs, BillDesk Paytm, among many others. These organizations are still awaiting RBI’s decision.

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Let’s look at the challenges facing regulators;

Private and external ownership

The RBI’s new licensing guidelines were a bold policy move that shifted to a privately-funded infrastructure program to manage payments in the country. This has actually opened the door for foreign players such as Amazon, Facebook, and Google to participate as a promoter of payment organizations that sell in India. The biggest problem is data privacy as many independent players in the digital space have been under the data privacy problems scanner in the past. The networks of some of the players who applied for a license have also been attacked by cyber.
“There are a lot of companies in India with foreign owners. At the end of the day, you need new ways to promote retail payments. I suspect there will be a strong Chinese wall built around it,” defends the leading player in an anonymous situation.

Conflicts of interest

Everyone who wishes to get a new umbrella is also a payment player in the market. Be it banks, fintech, or communications giants, all of these players are in the early stages of building new payment models for people. Design or NIU programs promoted by them may serve their interests. There will be issues of long-term relationship and arms between the two organizations. Will the RBI or the government allow high-paying players to also sit on the umbrella board, which has a strong interest in serving the community?

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Shared shares

NPCI was proposed by the banks for a share of the most widely distributed shares, with no single player owning more than 10 percent of the shares. But in the case of the organizers of the new umbrella business, the amount of equity will be much higher. The RBI Guidelines stipulate that no single promoter will have a share of more than 40 percent in a new payment business. Even 25 percent purification was only allowed after five years. This means that consortium members will have a strong voice in the company for more than 5 years.
At a time when digital payments are exploding in the market, especially to send epidemics, consortium players can influence decision-making.

The purpose of making a profit

The current NPCI sales payment business is a non-profit company. New RBI license practices have elevated ‘profit’ organizations in the sales pay gap. The very idea of ​​having a ‘profit-making’ traders’ organization could defeat the purpose as India is in the early stages of transforming into a cash-strapped economy. Money in the economy is still much higher than 12-14 percent even though it is made online. Rural and suburban areas are still dominated by the economy. No independent players will spend money to solve infrastructure issues in hinterland.

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