The Reserve Bank of India (RBI), on Saturday (February 27), extended the deadline for receiving applications for a New Umbrella Entity (NUE) license to March 31, 2021. The earlier deadline was February 26. In its notification, RBI wrote that it had received requests from various stakeholders, including the Indian Banks’ Association, for extending the timeline, keeping in view the Covid-19 related disruptions.
The central bank had released the framework for the authorisation of NUEs on August 18, 2020. Since then, major players in the Indian banking and payments landscape have formed coalitions, chalked business plans, detailed the technology to be used, security features, market analysis/research, benefit/s (if any) of its payment system.
NUEs have been envisaged as entities that will further innovation in the digital and retail payments sector to complement NPCI and reduce risks of overload on the Unified Payments Interface (UPI) infrastructure. They will be able to set up, manage and operate new payments systems, especially in the retail space, comprising but not limited to regular and white-label ATMs, point-of-sale (PoS) devices and Aadhaar-based payments and remittance services.
Below is the list of applications from businesses for getting the licence to launch NUE, so far.
- Tata Group – The most recent of the proposals that have reportedly been submitted to RBI for setting up an NUE. Tata Group will back the proposed NUE through its subsidiary Ferbine Pvt Ltd and is expected to hold the majority stake in the venture. Airtel Digital will buy a 10% stake in Ferbine while HDFC Bank and Kotak Mahindra reportedly have a 9.9% stake each in the venture. Mastercard and Nasper-backed PayU are also part of the consortium.
- Paytm & Ola – The two Indian startup unicorns have reportedly tied up with IndusInd Bank to apply for an NUE license. Non-bank lender Centrum Finance, along with fintech companies Zeta Pay and Electronic Payment and Services (EPS), are also expected to be part of the group.
- Amazon – Ecommerce giant Amazon, along with ICICI Bank, Axis Bank and Visa have reportedly sent a proposal too. According to reports, the consortium also features Indian merchant payments unicorn Pine Labs and Indian online payment gateway Billdesk. Previous reports had suggested that big tech giants such as Google, Facebook and Amazon may try and tap into the NUE opportunity by partnering with Indian companies.
- So Hum Bharat – In November last year, payments industry veteran Navin Surya floated a new entity, So Hum Bharat Digital Payments and announced that the company will apply for an NUE license. So Hum Bharat is a wholly-owned subsidiary of the BSE-listed financial technology company Infibeam Avenues. The new entity would be promoted by both Surya, chairman emeritus and Vishwas Patel, chairman of the Payments Council of India (PCI) and executive director of Infibeam Avenues. On February 27, ET reported that Jio Infosystems, Google and Facebook would also pick up a stake in So Hum Bharat, to participate in the NUE venture. In December last year, it was reported that Yes Bank was in talks with So Hum Bharat to pick up a 9.99% stake in the company.
NUEs have been imagined, not as rivals to the incumbent NPCI, but entities that will complement the state-owned body’s efforts towards enhancing access to digital payments. The central bank has stressed in its NUE framework that the new entities will need to set up systems that are interoperable with those already in place, built by NPCI. But unlike NPCI, NUEs can be for-profit entities, hence the interest shown by private players.
In November last year, Shishir Mankad, financial services head at Praxis Global Alliance, a management consulting firm, talked to Inc42 about the possible innovations that NUEs could bring to the retail payments space. “Let us say I want to use my debit card to generate a QR code. Today, both are different payment methods. But I believe such innovation is possible where I can generate a QR code from my debit card and send it to my wife who is at a grocery store. Now that my wife has the QR code on her phone, the store can scan it to pull the money from my account. NUEs will possibly look at further interoperability between different methods of retail payments,” he had said.
A detailed overview of NUEs and what to expect from them can be found in an earlier Inc42 story titled, “With Big Businesses Expected To Apply, Will NUE Make NPCI Redundant?”