Startup Policy Rundown: UPI Sets New Record In November, 30% Cap On UPI Transactions & More

The National Payments Corporation of India (NPCI)-owned Unified Payments Interface (UPI) network created a new record in November, processing close to 1.12 Bn transactions in the first 15 days of the month. It finally saw the number settle at 2.21 Bn by the month-end.   

November began on an optimistic note with WhatApp Pay getting its green signal from NPCI to ‘go Live,’ but with limitations. The payments authority said in a statement that Facebook-owned WhatsApp can expand its UPI user base in a coherent manner starting with a maximum registered user base of 20 Mn in UPI, wherein it has about 200 Mn users in the country.  

With the growing popularity of UPI payments across the country, NPCI has decided to cap the share of the total number of transactions that third-party payments apps like Google Pay, PhonePe, Google Pay, Amazon Pay and Paytm among others to process up to 30% of the total volume of UPI transactions. The decision is set to be effective from January 1, 2021, where NPCI is also likely to enforce these rules by moderating the onboarding of new customers. 

“With UPI reaching 2 Bn transaction monthly and potential for future growth, it has issued a cap of 30% of the total volume of transactions processed in UPI, applicable on all Third-Party App providers (TPAPs),” NPCI said in a statement. 

To this, Google Pay and PhonePe, which together holds more than 80% market share, are now worried about NPCI’s 30% cap move and stated that this would hinder the nation’s burgeoning digital payments economy.

Also, tech giants such as Google, Facebook and Amazon are also looking to collaborate with Indian companies to set up a rival against NPCI. While Amazon is still exploring options, Google and Facebook are said to have approached Reliance Jio for an alliance. 

In another update, the Indian Banks Association (IBA) and Payments Council of India (PCI) was in talks to create a self-regulatory body for digital payments ecosystem services as a measure to bring in more transparency in the interconnection between banks and the digital payments industry. The new authority is said to operate under RBI’s newly issued Self-Regulatory Organisation (SRO) framework, which will be responsible for framing and enforcing rules for payment systems operators.  

At the same time, many Indian companies and startups are also gearing up to apply for a new umbrella entity (NUE) license, which will allow them to set up their own PAN-India retail payments network. However, the companies are also having questions around interoperability between their solution and the system operated by NPCI as a large majority of the space is monopolised by it, which manages IMPS and UPI payments systems.

Startup Policies In November 2020 

Here are some of the biggest startup-related policy updates from across the country.

Indian Govt Issues Fresh Guidelines To Cab Aggregators 

The Union road transport and highways ministry issued fresh guidelines to bring ride-hailing apps, including Uber, Ola and others under a regulatory framework to make them accountable and responsible for their operations. 

One of the guidelines cites that aggregators will be allowed to charge a fare 50% lower than the base fare and a maximum surge pricing of 1.5x the base fare. The cap on car-pooling is expected to increase carpooling trips and the rise of ride-sharing aggregators in the coming months, along with imposing a cost burden on drivers and cab aggregators. 

Joint Parliamentary Commission Grills More Companies Over PDP & More

The Joint Parliamentary Commission (JPC) has held several discussions with a slew of digital and social media companies over the personal data protection (PDP) bill, in the past few months, including Google, Paytm, Twitter, Facebook and Amazon to understand provisions they have in place around data safety, privacy and investment patterns.  

In November, Reliance Jio was on the list. Replying to this, the company wrote to the JPC on concerns around Personal Data Protection, stating that Reliance Jio will never share the data with any foreign entities and it is in favour of data regulation. This comes at a time when 21.06% of stake in Jio is held by Facebook, Gulf-based entities like Mubadala and the Abu Dhabi Investment Authority. At the time, had clarified that the deal with Facebook did not include data sharing. 

Also, cab-hailing service providers, including Uber and Ola were also questioned by the authority over the safety of Aadhaar number details that they sought from riders and how and where such data was saved.

Till date, JPC has completed its discussion on more than 50 out of the total 98 clauses in the PDP Bill, 2019, which is likely to be tabled in Parliament during the Budget session 2021, seeking to ensure that the personal data of Indian citizens are safeguarded and not to store data overseas. The house panel has now been split into several key aspects over localisation of data issues in the PDP bill. 

At the same time, tech groups like software freedom law centre (SFLC) India has also written a letter to the chairperson of the joint parliamentary committee, Meenakshi Lekhi, seeking wider consultations on the policy and related issues. SFLC, in its letter, had stated while others were given a chance for appearance, civil societies haven’t been called for oral consultations by JPC. 

Govt Slaps INR 25K Fine On Amazon For Not Showing Country Of Origin 

After consumer affairs ministry had issued notices to ecommerce majors Flipkart and Amazon for not displaying mandatory information, including the country of origin of products sold on its platforms, Amazon has been slapped with a penalty of INR 25K for not following the rules. However, Flipkart has not been fined. 

DPIIT is reportedly planning to build an Open Network for Digital Commerce (ONDC) to set a protocol for cataloging, vendor discovery and price discovery as a measure to systematise the onboarding of retailers on ecommerce platforms. Accordingly, a committee of 11 members has been set up from various ministries and industry representatives and a pilot project is expected to start in December this year. 

Also, the Delhi high court has issued a notice to the government asking for responses on a petition filed by Dhruv Sethi which challenges a provision in the Consumer Protection (ecommerce) Rules that mandates all ecommerce entities to be registered as a company in India. 

CAIT Cries Foul, Writes To PM Demanding Regulation Of Ecommerce 

Trader’s body CAIT has accused ecommerce major Amazon of violating Foreign Direct Investment (FDI) policy and Foreign Exchange Management Act (FEMA) norms. But, this time, Praveen Khandelwal, the secretary-general of CAIT accused the ecommerce giant of conducting multi-brand retail activities in India and demanded action and imposition of the maximum penalty for the same. 

“Document available in the public domain show that Amazon has made an investment of about INR 35K Cr in Amazon India, a make-believe ecommerce marketplace, but in reality (it is) indirectly carrying multi-brand retail business,” added Khandelwal. 

To this, Amazon has denied the allegations and said that it complies with FDI laws and seeks regulatory approvals including from the Competition Commission of India (CCI).

Dragging the issue to Prime Minister Narendra Modi, CAIT is now demanding the authorities to regulate ecommerce in India. 

Tamil Nadu, Karnataka Looks To Ban Online Gambling Sites, Pass Legislation

After Andhra Pradesh, the Tamil Nadu government is now planning to ban on online gambling websites. In a Twitter post, Tamil Nadu’s chief minister Edappadi K Palanishwami said: “The Tamil Nadu government taking a note of the situation has decided to swiftly pass legislation for arresting people running the apps and those playing the gambling games that involve betting money.” 

Having a ripple effect, the neighbouring state Karnataka also is looking to ban online gambling websites. The state’s home minister Basavaraja Bommai said that people are losing their hard-earned money due to gambling addiction, Karnataka government will be banning these online games very soon.  

Telangana Launches EV Policy To Boost Adoption, Manufacturing Hub  

In a bid to boost electric vehicle adoption in the state, the Telangana government has announced its electric vehicles (EV) policy, which emphasises various subsidies, policy measures and other incentives. With this, the state government is also looking to turn the state into an EV and energy storage system (ESS) development and manufacturing hub, where it is focussing on creating attractive investment avenues in the sector, promoting research, development and manufacturing, and other methods to fast track the EV adoption.  

Accordingly, the government is said to offer a 100% exemption on road taxes and registration fees on the first 100K electric vehicles. Also, it has proposed to set up a battery charging or swapping stations every 50 Km on highways within the state. 

MeitY Launches Data Centre Policy To Boost Digital Infra 

The ministry of electronics and information technology (MeitY) recently released a draft data centre policy that will help the government provide infrastructure status for the data centre sector. Accordingly, the draft highlights that the status will help the sector avail long-term credit from domestics and international lenders at easier terms and, thereby boosting investment in the segment. 

In addition to this, the policy aims to simplify clearances for setting up data centres in the country. Also, MeitY looks to promote the global adoption of the services through its inter-government initiatives and memorandum-of-understanding (MoU).

CCI Now Opens Antitrust Investigation Case Against Google Pay 

The competition commission of India (CCI) has opened an antitrust case against global tech giant’s digital payments app Google Pay. The competition authority is now looking to further investigate the matter after it had issued a notice to Google, in May this year. It has alleged Google unfairly promoting its own payments app through ‘prominent placement’ and ‘imposing unfair terms’ on the Google Play Store and requesting users to use the payments app. 

To this, Google told the competition authority that the developers and users would leave Android if its quality deteriorates, as reported by Medianama. 

Following this, CCI also wrote a letter to 17 startups, including Paytm, Zomato, PhonePe, UpGrad, Dream11, GOQII, Razorpay, Matrimony.com and others, questioning them and collating their viewpoints on the ongoing controversy over Google abusing its dominant position in the operating system (OS) market, particularly Google Play Store. 

According to media reports, two of the founders who received the letter has confirmed that the CCI has asked startups for the agreements that they have signed with the various OS for placing their app on their app stores. “CCI has also asked startups about the revenue they share with the different OS as well as elements of costs needed for making mobile applications in the country.” 

In another update, CCI has approved internet major Google’s proposed purchase of 7.73% stake (INR 33,737 Cr) in Jio Platforms. In its filing, Google mentioned that its investment in Jio Platforms will be for manufacturing a new smartphone in India. 

Digital News Portals, OTT Providers Comes Under I&B Ministry’s Ambit  

The information and broadcasting (I&B) ministry recently brought online news portals and OTT providers like Hotstar, Netflix and Amazon Prime Video and others under its ambit as a measure to strengthen its authority over online news and content carried on OTT platforms. Previously, the government could not regulate online content because these platforms do not require any certifications as they do not come under the Cinematograph Act of 1952. 

But, now, with the recent notification issued by the Cabinet Secretariat has amended the Government of India (Allocation of Business) Rules, 1961 by inserting two new entries — 22A and 22B —  to the Second Schedule of the Rules. The two new rules issued by the government include films and audio-visual programmes made available by online content providers; and news and current affairs on online platforms. 

I&B recently held a meeting with stakeholders on November 18, to discuss the issue of ads aired by Mobile Premier League (MPL) pool winner, Naam11.com and Dear Lottery, which possibly goes against existing advertising and consumer protection regulations. This comes at a time, where advertising standards council of India (ASCI) found an ad endorsed by Virat Kohli for MPL as not substantiated with any verifiable comparative data on being the ‘biggest online game’ through an audited report or third-party validation. 

The advertising authority is now looking to come up with a new norm in the coming months. 

Delhi Govt Announces 25% Subsidy For Ecycles 

At the virtual event, the Dialogue and Development Commission Vice Chairperson Jasmine Shah recently said that its electric vehicle will help reduce carbon emission by 4.8 Mn tonnes by 2024. “The motivation behind Delhi’s ambitious roadmap to the transition of zero-emission vehicles is to address both climate change and the health emergency that arises from the high level of air pollution in Delhi.” 

Also, the Delhi government is looking to subsidise 25% of the cost of electric cycle (up to INR 5.5K) and give a fixed additional incentive of INR 2K on the first 10K ecycles, along with providing higher incentives for cargo e-bikes. 

Govt Urges Gig Workers To Update Details Under Draft Labour Code 

As per the Code on Social Security (Central) Rules, 2020, all unorganised sector workers, including gig and platform workers are requested to update their particulars such as a current address, present job, the period of engagement with gig firms, skills and mobile number on the portal specified by the Central government.  

The draft rules dated November 13, which is made public for inviting public comments within 45 days, stated: “In the absence of such updation, a gig worker or platform worker may not remain eligible to avail benefits of the social security schemes notified under the Code,” 

Govt To Set Up Drone Directorate   

The Directorate General of Civil Aviation (DGCA) has got an official nod from the Finance Ministry to set up a dedicated Drones Directorate, which is poised to manage India’s drones ecosystem. 

According to Amber Dubey, joint secretary at the Civil Aviation Ministry, the Directorate had been established with eight DGCA officials, to begin with, and will be expanded with time. “This was a pleasant surprise since, under the Covid-19 austerity measures, the formation of any new government department is being discouraged, unless really important. One more baby step towards making India the drone capital of the world” added Dubey, in a Linkedin post. 

Govt Gives One Year For Digital News Media Firms To Comply With 26% FDI Rule 

The Indian government has directed foreign digital media companies to comply with the 26% foreign direct investment (FDI) policy by October 15, 2021, as a measure to keep a tap on foreign influence and interference in news websites, portals, aggregators and agencies. The FDI limit for the digital media sector was restricted to 26% in 2019. However, before that, 100% FDI was allowed through the automatic route. 

At the same time, the government is also looking to consider up to 26% FDI from countries with which it shares a land border, including China. Currently, an inter-ministerial panel of secretaries is discussing various options and a decision is expected soon. 

According to industry experts, this decision is likely to accelerate more than 100 pending proposals that are stuck after the revised FDI policy which was amended in April this year, where the government had set up a screening panel to vet all Chinese foreign investment proposals and was supposed to approve only ‘non-controversial’ proposals. Interestingly, the panel is said to constitute the same members who have suggested the government to ease rules. 

India Looks To Ban Chinese Private Telecom Players In 5G Participation 

The Indian government is most likely to ban private telecom players from sourcing critical equipment from Chinese manufacturers. The move, potentially, could hamper Chinese telcos Huawei and ZTE’s ambitions of taking part in India’s 5G trials. The Indian telecom operators are now seeking clarity on the norms before the 5G action, slated for the January-March quarter of next year. 

Parliament Accepts Twitter’s Apology For Wrongly Showing Ladakh In China 

In October, JCP on the PDP bill had come down heavily on Twitter for showing Ladakh as part of China, saying it amounted to treason and had sought an explanation. The social media giant has now apologised and promised to correct the error by the month of November. 

Meenakshi Lekhi, the chairperson of the Parliamentary panel said that Twitter made the deposition in the form of an affidavit signed by Damien Karien, chief privacy officer of Twitter Inc, for wrong geo-tagging of India’s map. 

RBI’s Working Group Likely To Allow Large NBFCs To Convert Into Banks 

The Reserve Bank of India (RBI’s) internal working group (IWG) recently recommended that non-banking financial companies (NBFCs) with an asset size of INR 50K Cr and above, would be considered for conversion into banks, particularly with 10 years of operations. The internal team is likely to review ownership guidelines and corporate structure of private sector banks and others. 

In the same month, M Rajeshwar Rao, deputy governor of RBI also had hinted that NBFCs of a certain size should be converted into banks and be subjected to the same regulatory framework. 

Karnataka Startup Cell Partners With The Netherlands 

The government of Netherlands and Karnataka Startup Cell recently announced its partnership with Holland’s Business Agency to soft launch a programme to help 50 Indian tech startups expand into Europe, provide market access, capital and infrastructure. The programme is said to focus on several key areas, including artificial intelligence (AI), cybersecurity, agriculture, healthcare and smart cities for the digital soft landing in Hague. 

Tax Department Rejects DPIIT Proposal To Extend Exemptions To Startups 

As requested by DPIIT to extend the startups incorporation cut-off date to March 31, 2026, the tax department has now turned down a proposal to extend cut-off date for startups by five more years, to the current window which expires from April 2021. 

Previously, the government had already exempted DPIIT-recognised income tax for a period of three years since incorporation under Section 80IAC of the Income-tax Act. 

India Govt Bans More Chinese Apps 

After banning 59 Chinese mobile apps on June 28, 2020, and 118 apps on September 2, 2020, under section 69A of the Information Technology Act, the government of India on Tuesday (November 24), banned 43 more Chinese mobile apps for the very same reason. Some of the notable apps in the recent Chinese app ban scene include AliExpress, Snack Video (TikTok clone), MangoTV and others. The Republic of China cries foul play and says that the move violates the rules of the World Trade Organisation (WTO). 

Indian Govt Plans To Set Up Infra For 69K EV Charging Stations 

The Union transport minister Nitin Gadkari recently announced the plans to set up infrastructure for one e-charging kiosk at around 69K petrol stations across India, in line with India’s EV30 vision.  At a virtual conference, Gadkari said that the government has taken multiple measures to promote EVs, including cutting GST to 5%, allowing delinking of battery cost of 2-3 wheelers from vehicle cost and many more. 

TRAI Imposes Hefty Penalties On Telcos 

The Telecom Regulatory Authority of India (TRAI) has imposed a hefty penalty of INR 30.1 Cr on state-run Bharat Sanchar Nigam Ltd. (BSNL), INR 1.82 Cr on Vodafone Idea (Vi), INR 1.41 Cr on Quadrant Teleservices and INR 1.33 Cr on Airtel for failing to curb spam calls and text messages to their users. Overall, all eight Indian telcos, including Reliance Jio, MTNL, Videocon and Tata Teleservices have been fined a collective amount of INR 35 Cr by TRAI.