- GS-3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
- GS-2: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
New Umbrella Entities (NUE)
Context: The RBI has set a deadline of March 31 for firms to submit their applications for setting up new umbrella entities (NUEs)
What are NUEs?
- As envisaged by the RBI, an NUE will be a non-profit entity that will set-up, manage and operate new payment systems, especially in the retail space such as ATMs, white-label PoS; Aadhaar-based payments and remittance services.
- NUE should take care of developmental objectives like enhancement of awareness about the payment systems.
- NUE should operate in clearing and settlement systems, identify and manage relevant risks such as settlement, credit, liquidity and operational and preserve the integrity of the systems.
- In addition to this, they will develop new payment methods, standards and technologies as well as operate clearing and settlement systems.
- NUE can carry on any other business as suitable to further strengthen the retail payments ecosystem in the country.
- It is an idea floated by the Reserve Bank of India to create an alternate mechanism to the existing National Payments Corporation of India (NPCI)
Which players are planning to set up NUEs?
- Only those entities that are owned and controlled by Indian citizens with at least three years of experience in the payments segment can become promoters of NUEs.
- Also, foreign investment is allowed in NUEs as long as they comply with the existing guidelines.
- Several companies have either tied up banks or major tech players to apply for NUEs.
What is the need for NUEs?
- Currently, the umbrella entity for providing retail payments system is NPCI, which is a non-profit entity, owned by banks.
- NPCI operates settlement systems such as UPI, AEPS, RuPay, Fastag, etc.
- Players in the payments space have indicated the various pitfalls of NPCI being the only entity managing all of retail payments systems in India.
- RBI’s plan to allow other organisations to set up umbrella entities for payments systems aims to expand the competitive landscape in this area.
- For the players planning to establish these NUEs, the aim is to get an even bigger share in the digital payments sector.
Connecting the dots: