On March 31, 2021, ICICI Bank and Axis Bank, have tied up to launch a New Umbrella Entity(NUE) for retail payments along with global e-commerce major Amazon and cards major Visa as their partners.
- ICICI Bank and Axis Bank will be co-leading with each having a 20% stake (40%) and the other partners including Amazon, Billdesk, Pine Labs and Visa will be holding a stake of 15% each (60%)
Background:
- RBI allowed other organisations to set up umbrella entities for payments systems to create an alternate mechanism(rivalry) to the National Payments Corporation of India (NPCI) for speeding up the cashless payment.
- RBI has fixed March 31, 2021, as the deadline for making application to form NUEs.
Other entities which formed NUEs:
- Reliance Industries along with Facebook and Google
- Paytm with OLA
- Tata Group with Mastercard, Bharti Airtel, Kotak Mahindra Bank and HDFC as its partners
About New Umbrella Entity(NUE):
- NUEs will be a non-profit entity that will perform as like NPCI and operate new payment systems, especially in the retail space such as ATMs, white-label point of sale terminals (PoS), Aadhaar-based payments and remittance services, operation of clearing and settlement systems for participating banks and non-banks, be interoperable with NPCI.
- They will be participating in the RBI’s payment and settlement systems.
Functions of NUE:
- It will develop new payment methods, standards and technologies.
- It will operate clearing and settlement systems, identify and manage risks such as settlement, credit, liquidity.
- To avoid shocks, frauds and contagions it will monitor retail payment system developments.
Framework for forming NUE:
i.Governance: RBI has the right to approve the appointment of directors
ii.Shareholding Pattern:
- Any entity holding more than 25% of the paid-up capital of the NUE will be deemed to be a promoter.
- The promotor/promotor group should have 3 years of experience in the payments ecosystem
iii.Capital:
- Minimum paid-up capital – Rs. 500 crore
- Minimum net worth – Rs. 300 crore (should be maintained at all times)
- No promoter or promoter group should have more than 40% of investment in the capital of the entity.
iv.Foreign Investment is allowed in NUEs
Recent Related News:
On November 4, 2019, RBI announced the opening of the first cohort under the Regulatory Sandbox (RS) with “Retail Payments”, as its theme. Natural Support Consultancy Services Pvt. Ltd. of Jaipur, Rajasthan and Nucleus Software Exports Ltd. of New Delhi have started the first test phase of their products viz. “eRupaya” and “PaySe” respectively.
About ICICI Bank:
Establishment – 1995(Incorporated in 1994)
Headquarters – Mumbai, Maharashtra
MD& CEO – Sandeep Bakhshi
Tagline – Hum hai na, Khayal Apka
About Axis Bank:
Commenced operations – 1994(founded – 1993)
MD & CEO – Amitabh Chaudhry
Headquarters – Mumbai, Maharashtra
Tagline – Badhti ka Naam Zindagi
