RBI Rejects Google &

Amazon Proposal
to Replace UPI
- By Ankit Agrawal
 ankitmay28
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 WHAT HAS HAPPENED?

The Reserve Bank of India (RBI) has put on hold licensing of

the New Umbrella Entity (NUE) network, a fintech institution
planned as a rival to National Payments
Corporation of India (NPCI).

Six groupings, which included Facebook, Google, Amazon,

Flipkart and others, had applied for NUE licences.
The regulator will not grant permission to any of the
six consortiums to commence business,

As all of them have fallen short of the RBI's

expectations, said people familiar with the matter.
 BACKGROUND

The RBI had in 2020 issued guidelines for corporates to

create for-profit NUEs,

With an aim to foster competition and "de-risk" India's

burgeoning digital payments ecosystem,

Where much of the settlement burden has fallen on the non-

profit NPCI over recent years.
 As per the rules, no single promoter could have over 40%
stake, which had to be lowered to less than 25%
in five years of operation.

The entity also needs a paid-up capital of Rs 500 crore to get

RBI approval.
 NATIONAL PAYMENT CORPORATION OF INDIA

NPCI, a ‘not-for-profit’ entity registered under section 8 of

Companies Act, is owned by a consortium of leading
public and private sector banks.

It is directly responsible for functioning of highly important

digital payment channels such as Unified Payment Interface,
NACH, National Financial Switch (NFS) and IMPS.
 The NPCI, set up in 2008, currently
dominates the retail payments space and
operates more than 12 such platforms.

Established by
RBI & IBA.
54 banks currently shareholders of NPCI include 17 public sector
banks, 17 private banks, 3 foreign banks, 10 co-op banks,
and 7 regional rural banks.

As of November 2020, the top shareholders of NPCI included-

Union Bank of India with 9.15%

Bank of Baroda with 9.15%
PNB 9.15%
Canara Bank 8.14%
SBI 7.12%
Bank of India 7.12%
ICICI Bank 7.12%
HDFC Bank 7.12%
 WHAT IS RETAIL PAYMENT SYSTEM?

Retail payments usually involve transactions between two consumers,

between consumers and businesses, or between two businesses.

Although there is no definitive division between retail and

wholesale payments,

Retail payment systems generally have higher transaction volumes and

lower average values than wholesale payment systems.
 The RBI, in February 2019, had proposed to create an
alternative umbrella organisation for retail payments to
prevent monopoly and concentration risk.

In a policy paper, the central bank had suggested

that the NPCI became ‘too big to fail’.
 WHAT RBI EXPECT FROM NEW ENTITY?

NUEs were supposed to set up and operate a new retail digital

payment system and manage clearing and settlement systems that
could be an alternative to the bank-promoted NPCI.

It’s expected that the [new] umbrella entity shall offer

innovative payment systems,

To include hitherto excluded cross-sections of the society, and which

enhances access, customer convenience and safety, and
the same shall be distinct yet interoperable.
An NUE licence was expected to help the participating entity gain
greater autonomy in processing digital payments in India.

The licence would help establish a firm presence in the financial

services ecosystem through value-added lending
and insurance services.
 THE APPLICANTS

The applicants included a consortium of Facebook, Google and

SoHum Bharat, along with Jio Platforms.

The Tata Group expressed interest in an association with Kotak

Mahindra Bank, HDFC Bank, Airtel Digital, Flipkart,
Mastercard and PayU.

Ecommerce giant Amazon along with ICICI Bank, Axis Bank, Visa,
Pine Labs and BillDesk had formed another grouping while Paytm
had set up a partnership with Ola Financial,
Policybazaar and IndusInd Bank.
All the applications were given in March-April 2021 but there
has been no communication from the RBI after that.

Some banks did check with the regulator a couple of times but
were told to wait and we haven't heard about
this for a long time now.
 CONCLUSION

It looks like none of the applicants have proposed anything

novel or a great technology breakthrough that
would have made RBI happy.

Almost all of the plans were similar to that of the NPCI,

which apparently did not enthuse the RBI.
Q. At which of the following places, printing press of
Reserve Bank of India is not present?

A) Nashik

B) Dewas

C) Salboni

D) Mumbai
RBI Rejects Google &
Amazon Proposal
to Replace UPI
- By Ankit Agrawal
 ankitmay28

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