Reserve Bank of India has released the framework for setting up of pan-India Umbrella Entity for the retail payments. The bank has also invited the applications from the eligible companies by February 26, 2021.
The Umbrella entity will be expected to monitor the national as well as international developments in order to avoid the shocks and frauds that can adversely affect the economy and the system in general.
Apart from the other things, the Umbrella Entity will be permitted to operate the settlement and clearing systems for banks and non-banks. It can also identify and manage relevant risks such as credit, settlements, operational and liquidity, and preserving the integrity of the system.
What does the RBI released framework entails?
According to the framework, the companies that have a net worth of over Rs. 500 crores will be eligible to set up an umbrella entity. Among other things, the entity will be permitted to set up, operate, and manage new payment systems in the retail space comprising White Label PoS, ATMs, remittance services, and Aadhaar-based payments.
RBI released framework for pan-India entity: Key Highlights
• The promotes or promoters group must upfront the capital demonstration of not less than 10% at the time of making the application to set up the Umbrella entity.
• As per the guidelines, the net worth of Rs. 300 crores must be maintained at all times.
• In the case of FDI in the applicant entity, it will have to fulfill the capital requirements as applicable under the Foreign Exchange Management Act (FEMA) along with necessary approval from the competent authority.
Application process for the Umbrella Entity:
While inviting applications, RBI also mentioned that the promoter/promoter group of the entity shall be owned and controlled by the resident Indian citizens. The application must also have a detailed business plan that covers the payment systems proposed to be set up. It must also have other documents to establish the company’s experience in the payments ecosystem.
As per the central bank, the applications will be taken up for processing only after the last date of receipt of applications and the scrutiny of the applications will be undertaken by an External Advisory Committee (EAC).
The bank has further informed that the Board for Regulation and Supervision of Payment and Settlement Systems (BPSS) will be the final authority of issuing the authorization to set the umbrella entity. RBI plans on completing the process within a period of six months.
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