A five-member committee is set up by the Reserve Bank of India (RBI) to review applications and make recommendations on licenses for new umbrella organizations (NUE), the Economic Times reported. RBI Chief General Manager P Vasudevan will chair the five-person committee, the report added. The details of the other four members of the committee are not yet known.
The committee is tasked with examining many aspects of NUE, such as the macroeconomic impact of the program and security risks. ET’s sources said that the committee’s recommendations will be considered before licenses are issued.
The announcement is an important indicator of RBI’s intention to move the program forward. The central bank recent decision Postponing the issuance of NUE licenses plunged the program into uncertainty, without the RBI having any clarity. The for-profit NUE units were investigated after the RBI became wary that the growing volume of payments was centered on a single operator – the National Payments Corporation of India. The NPCI processed over Rs. In 2020-2021 alone, financial transactions valued at $ 128 million were made.
Why did RBI postpone the program?
According to a LiveMint. the RBI gave several reasons when it decided to discontinue the NUE program report.
- Unclear information about the security of data vis-à-vis foreign companies
- Mastercard’s failure to comply with local data retention standards and subsequent ban on the company from issuing new credit cards.
- Data breaches at MobiKwik and BigBasket affected the private sector’s ability to deal with threats related to payment transactions.
The All India State Bank of India (SBI) staff association and UNI Global Union had previously pushed the central bank to abolish the “whole NUE licensing process” and instead focus on strengthening the NPCI.
The corporations warned in a letter that the involvement of multinational companies could lead to misuse of user data. They also said that privatization would put data security at risk.
What is NUE?
The RBI in their January 2019 paper, had expressed an interest in setting up NUEs to encourage competition in the digital payments market. She added that there was a need to reduce concentration risks stemming from NPCI being the only operator.
There has been a lot of interest from many startups, fintech companies, major banks and global financial giants as a NUE license allows them to break into part of the emerging Indian payments market. The portion comes in the form of profit that licensees can earn by charging fees for transactions, as opposed to the NPCI, which is designated as a nonprofit.
A NUE is expected to:
- Interact and be interoperable with the systems of the NPCI.
- Create a track for retail payments in the area of automated teller machines (ATM), white label point-of-sale machines, Aadhaar-based payment and remittance services, and other digital payment methods
- Develop methods, standards and technologies for your payment systems
- Look out for development goals like raising awareness of the payment systems
- Manage the settlement, credit, liquidity and operational risks of the system
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