After the Reserve Bank of India (RBI) invited expressions of interest last year, at least six consortiums, including those led by Amazon, Google, Facebook, and the Tata group, applied for the so-called new umbrella entities (NUEs) licences in partnership with companies like Reliance Industries Ltd and ICICI Bank Ltd.
According to the experts, and familiar with the issue, a plan to allow new businesses to launch digital payment platforms and remove the National Payments Council of India's (NPCI) domination in online transactions has been put on hold by the regulator due to data security concerns.
The finance ministry, however, prevented public sector lenders such as the State Bank of India and Union Bank from applying for licences since they were shareholders in NPCI. Because the problem of data security involving foreign businesses remains a major worry, the RBI has decided to postpone the new licences for the time being. Bank unions, on the other hand, were not pleased with the RBI's decision from the outset, and neither were state-run lenders. Allowing foreign firms to set up payment networks in India has been a source of concern for the unions.
Reuters reported in June that the All India State Bank of India (SBI) Staff Federation and the UNI Global Union urged RBI to abandon the licencing procedure and focus on strengthening NPCI. The recent ban on MasterCard for failing to comply with data localization regulations may have prompted RBI to reconsider the NUE plans. Even three years after the laws were announced; global payment businesses such as MasterCard, Amex, and Diners Club have failed to provide the audit report proving conformity with Indian rules.
Furthermore, recent data breaches at MobiKwik and Bigbasket may have prompted the RBI to consider the dangers of letting the private sector handle payment processes.
Last year, the RBI asked companies to compete for licences to set up for-profit digital payments processing platforms in order to reduce payment sector concentration risks and provide users with additional options. The RBI had then stated that the payments network will be permitted to levy transaction fees. Customers' float in their online payment accounts would likewise generate interest for the new corporations.
Banks did not want to be left out of the conversation. Banks are arguing that NUE without state-run banks is not something they would be pleased with due to political pressure. The second person, who also requested anonymity, said, "There is a lot of work going on behind the scenes." NPCI handles a significant portion of retail payments. Some retail payment platforms run by NPCI, which is incorporated as a non-profit, include the popular unified payments interface, or UPI, the Immediate Payment Service, or IMPS, Bharat Bill Pay, Aadhaar-enabled Payment System, and RuPay. Many organisations are eyeing a piece of the fast increasing digital payments market through the NUE. From 23.26 billion in the fiscal year 2018-19 to 43.7 billion in the fiscal year 2020-21, digital payments increased by 88 percent to $43.7 billion’s likely that RBI will take a wait-and-see approach before moving forward with this.