Reserve Bank of India puts new payment network plan on hold

The process of allowing new organizations to create digital payment platforms and end the National Payments Council of India’s (NPCI) rule over online activities is being held by the regulator on data security issues, said two people who are not familiar with the development.

At least six agreements, including those led by Amazon, Google, Facebook and the Tata group, applied for new umbrellas (NUEs), in partnership with companies such as Reliance Industries Ltd and ICICI Bank Ltd behind the Reserve Bank of India (RBI). invited interesting talks last year.

Lenders from state-owned enterprises such as State Bank of India and Union Bank, however, were barred by the finance ministry from seeking licenses as they were shareholders in NPCI.

“The RBI feels that the issue of data security affecting foreign organizations remains a very important issue, therefore, it has decided not to proceed with the new licenses at this time,” said one of the two people mentioned above on condition of anonymity.

The move by the central bank has met with criticism from banking unions from the outset, and even government lenders are happy with their dismissal.

The unions have raised concerns about allowing foreign organizations to set up payment networks in India.

The All India State Bank of India (SBI) Staff Federation and the UNI Global Union have urged the RBI to stop the licensing process and focus on strengthening the NPCI, Reuters reported in June.

Last year, the RBI invited companies to bid for licenses to set up digital payment processing platforms to reduce the risk of fraud in the payment system and give users more options.

The RBI then says that the payment network will be allowed to charge the transaction fee.

New businesses will also receive interest from the float customers keep in their online payment accounts.

“Banks did not want to be left out. Because of pressure from the government, banks want the NUE without state-owned banks is not something they can be happy about. There is a lot of work being done in secret, ”said a second person who also requested anonymity. “It is possible that the RBI will wait and watch before proceeding with this.”

Mastercard’s recent ban on non-compliance with data processing regulations could also lead the RBI to consider NUE proposals. Global payment firms such as Mastercard, Amex, Diners have failed to provide an audit report confirming compliance with Indian laws even three years after the laws were issued.

In addition, recent data breaches in MobiKwik and Bigbasket would have made the RBI aware of the risks involved in allowing the private sector to control payment transactions.

The bulk of the sales payments are processed by NPCI. For example, an integrated payment payment interface, or UPI, Immediate Payment Service, or IMPS, Bharat Bill Pay, Aadhaar Payment System, and RuPay are some of the payment payment platforms used by NPCI, installed. as a non-profit.

As digital payments grow rapidly, many companies are looking at a piece of this growing business with NUE. Digital payments have exceeded 88% to 43.7 billion in the 2020-21 financial year from 23.26 billion in 2018-19.

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