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RBI Released a Draft Framework for Retail Payments System

Published on Friday, August 21, 2020
On 20th August 2020, the Reserve Bank of India released Framework for Pan-India Umbrella Entity for retail payments with a minimum paid-up capital of Rs 500 crores.

Key feature:

  • The entity will develop standards, payment methods, and technologies related issues as well as will operate, manage new payment systems that comprise of ATMs, Aadhaar based payments, label Point of Sales, remittance services.
  • The Board for Regulation and Supervision of Payment and Settlement Systems will be the final authority to approve the authorization for setting up umbrella entity/entities and the directors of the board are to be appointed by the Apex bank.
  • The Apex bank has invited applications from the eligible companies by 26th February 2021, which will scrutinize by an External Advisory Committee (EAC).
  • This entity will supervise the national as well as international developments and identify the relevant risks such as credit, settlements, operational and liquidity, and preserve the integrity of the system in order to avoid the frauds.
  • It will also operate the settlement and clearing systems for banks and non-banks.
  • Also, the net worth of Rs. 300 crores must be maintained at all times.
  • Reserve Bank of India plans to complete the process within a period of six months.
  • Presently National Payments Corporation of India (NPCI) is the only Umbrella Entity for Retail Payments in India and now the approved entity may start functioning as an Umbrella Entity for Retail Payments in India just like NPCI.

Highlights of the entity:

  • The entities are to be incorporated under Companies Act, 2013 and authorized under Section 4 of Payment and Settlement Systems act, 2007.
  • The entity holding paid-up capital between 25% and 40% of the umbrella entity will be considered to be a promoter,
  • The promoters should make payment of 10% of minimum capital i.e., ₹50 crores at the time of making an application for setting up of the umbrella entity.
  • The promoter shareholding can be diluted to a minimum of 25% after 5 years of business of the entity.

National Payments Corporation of India NPCI

  • The NPCI is the hub of all electronic retail payments in India. It was founded in 2008 and incorporated as a not-for-profit company under Section 8 of the Companies Act, 2013.
  • The NPCI provides the following services:
    • Aadhaar Enabled Payment System
    • Bharat Bill Payment System
    • BharatQR
    • BHIM Aadhaar Pay
    • Cheque Truncation System
    • Immediate Payment Service
    • National Automated Clearing House
    • National Electronic Toll Collection
    • National Financial Switches
    • RuPay
    • National Common Mobility Card
    • National Automated Clearing House
    • Unified Payment Interface


Ques: 1. What is the minimum paid-up capital requirement for setting up an Umbrella Entity for Retail Payments in India?
Answer: Rs 500 crore

Ques: 2. Under which act the entities are to be incorporated with?
Answer: Companies Act, 2013

Ques: 3. What is the percentage of The Promoter / Promoter Group shareholding can be diluted after 5 years of the commencement of the business of the umbrella entity?
Answer: 25%
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