The Tata Groups’ foray into the bidding process for acquiring an NUE license is attracting several partnerships.
As RBI is committed to pushing the digital payments to a great level of usage, it’s offering a limited number of licenses to private conglomerates to set up New Umbrella Entity (NEUs), which will effectively compete with NPCI. Just like NPCI runs UPI, IMPS and other payment modes, the NUEs will create similar mechanisms for banks and fintech companies. considering the unprecedented growth in UPI payments and sensing this as an opportunity of a lifetime, private players are coming together to grab a license.
According to recent media reports, Tata-promoted Ferbine’s has planned to create a New Umbrella Entity (NUE).
Tata Group will own 40% stake in Ferbine while Airtel Digital, MasterCard and National Bank for Agriculture and Rural Development aka NABARD each will have 10% ownership. HDFC Bank and Kotak Mahindra Bank will own 9.99% each while Flipkart’s FlipPay and PayU will have 5% stake in Ferbine.
The Tata Group has applied for a New Umbrella Entity license as part of its collective effort to roll out a Super App which will compete with the likes of Reliance and Amazon in India’s online retail space in India. Ferbine will be a pan-India umbrella entity or PUE for retail payments.
The RBI expects the creation of NUEs to increase the growth and adoption of digital payments. According to the central bank, these new ventures won’t compete with the NCPI. Instead, they will complement the existing platforms being run by the NCPI.
The major difference between NCPI run platforms and NUEs is that the latter can be for-profit while the prior can’t.
The Reserve Bank of India’s guidelines for NUE states that the licence holder will be responsible for creating new solutions for ATM networks, PoS aka point-of-sale services, Aaadhaar-based payments and remittances.
Now, while the RBI is scouting for NCPI alternatives under the pretext of not having to over rely on UPI alone, the GOI isn’t very happy about the apex bank’s proposal to do so. Why?
The Indian Government is of the opinion that the payments’ infrastructure should be a core function much like issuing Aadhar or voter ID card and therefore handled and supervised by the government alone.
NUE License: Other Consortiums In The Race
There are only two NUE licences up for grabs according to senior industry executives who are aware of the developments. But, there exist several many coalitions which are vying to bid for them.
Aside from the Tata-led consortium, others in the NUE race include PayTM (which has partnered up with Ola and Indusland Bank), Amazon (which has tied up with ICICI Bank and Axis Bank) and Reliance Industries (which joined hands with global tech giants Facebook and Google).
As per the rules laid down by RBI, no single promoter or promoter group can hold more than 40% stake in the umbrella entity. Thus, this is why companies are partnering up to bid for the NUE licence.
Lastly, the window of opportunity to acquire an NUE licence still remains open as the RBI has extended the deadline for sending applications for the same to March 31st. Therefore, it is safe to assume, we are highly likely to see more companies throwing their hat in the ring to create their own UPI-like payments infrastructure.