The Reserve Bank of India (RBI) has set up a five-member committee to review applications and give recommendations on new umbrella entity (NUE) licences.
The five-member committee will be chaired by RBI chief general manager P Vasudevan. The New Umbrella Entities will set up their own payment infrastructure to compete with the National Payments Corp. of India (NPCI).
Significance
The centre aims to build a settlement system similar to the unified payments interface (UPI) with the new umbrella entity (NUE) licences. The system will mainly focus on small and medium enterprises, merchants and consumers.
Key Details
•The five-member committee will be responsible for looking into several aspects of New Umbrella Entities.
•It will be responsible for various aspects, starting from the macroeconomic impact of the NUEs to security risks.
•The committee will give recommendations that will be taken into consideration before giving out the licences.
What are New Umbrella Entities?
New umbrella entities are for-profit entities that will be set up to manage payments in the retail space. These private entities can offer a range of retail payment services, including setting up of ATMs, point of sale terminals, Aadhaar-based payments, remittance services and develop newer payment methods.
Why has RBI allowed creation of New Umbrella Entities?
The Reserve Bank of India had in August 2020 issued guidelines, inviting companies to create New Umbrella Entities to end the monopoly of National Payments Council of India (NPCI), which acts as a non-profit.
Why are bank unions opposing NEUs?
The State Bank of India union along with a global alliance had in June 2021 asked the RBI to bar large companies from setting up payment networks, stating that privatisation could compromise data safety.
The bank unions urged the central bank to scrap the "whole process of NUE licensing" and focus on strengthening the domestic payments group, NPCI.
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