A union representing India’s largest state-run bank SBI and a global alliance have asked the Reserve Bank Of India (RBI) to bar large companies from setting up payment networks, saying that privatisation could compromise data safety, according to reports.
Last year, the RBI had issued guidelines for corporates to create for-profit new umbrella entities (NUEs), which aimed to ease the burden on the NPCI and reduce risks of overload on the Unified Payments Interface (UPI) infrastructure. NUEs are expected to bring further innovation in the digital and retail payments sector to complement NPCI and reduce risks of overload on the Unified Payments Interface (UPI) infrastructure.
Under RBI’s NUE policy, private sector companies can set up pan-India retail payments entities including digital and ATM transactions with similar powers as the NPCI.
The group, comprising associations such as UNI Global Union, IT for Change, Joint Action Committee Against Foreign Retail and E-commerce (JACAFRE) and the All India State Bank of India Staff Federation (AISBISF), also raised objections around multinational corporations —particularly Amazon.com Inc.—being allowed to own private NUEs under the framework.
“Our submission is at three levels. At the first level, we would like to contest the very need of setting up NUEs in competition to NPCI, which operates as a quasi-public body, in a non-profit manner,” the letter sent to the RBI stated, wrote ET.
The letter urged the central bank to scrap the “whole process of NUE licensing” and focus on strengthening the domestic payments group, NPCI, which operates as a non-profit.
The group also raised concerns of potential abuse of user data by firms vying for the NUE licences as well as competition risk to India’s indigenous payments networks such as RuPay and UPI, which are owned and operated by NPCI. It demanded that RBI reject Amazon’s application to set up a new “fee rich” for-profit payment system because “Amazon lacks the record of fairness and integrity as mandatorily required” by the RBI.
“India shouldn’t give away its digital wallet to a company like Amazon with a long history of unethical, anti-worker, and anti-competitive practices,” said Rajendra Acharya, UNI Global Union Regional Secretary for the Asia Pacific in a blog. “Millions of Indians depend on easy to use, fee- online payments to conduct everyday business and go about with their lives. The RBI should keep the NUE in the hands of responsible actors that put people before profits.”
The NUE Strategy
According to the RBI guidelines, each NUE will require a minimum paid-up capital of INR 500 Cr for risk management, technology infrastructure, business operations and more. An applicant will need three years of experience in the payments ecosystem either as a payment system operator (PSO) or as a payment service provider (PSP) or as a technology service provider (TSP).
The six NUE consortiums that have applied to the RBI for licensing include Tata Group-Flipkart-Payu; Nabard, RIL-Facebook-Google; So Hum Bharat, Amazon-Axis Bank; ICICI Bank- Pine Labs-Visa-Billdesk; Paytm-Ola-PolicyBazaar and iServeU.
NUEs have been imagined, not as rivals to the incumbent NPCI-led payments systems, but as 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, whereas the payment systems backed by NPCI such as UPI have proven to be costly loss-making affairs.