The Reserve Bank of India (“RBI”) on August 18, 2020 issued a framework (“Framework”) for establishing pan-India umbrella entity/ entities (“Umbrella Entity”) focusing on retail payment systems, which will be responsible for framing and enforcing rules for payment systems operators.
According to the Framework, the Umbrella Entity may be a ‘for-profit’ or a Section 8 company as may be decided by it. It will set up and operate new payment systems in the retail space comprising of but not limited to ATMs, white label PoS, Aadhaar based payments and remittance services, newer payment methods, standards and technologies, monitor related issues in the country and internationally and take care of developmental objectives like enhancement of awareness about the payment systems.
The Framework also elaborates on the 'fit and proper' requirements for promoters/promoter groups. Companies with a net worth of over Rs 500,00,00,000 (Rupees five hundred crore) will be eligible to set up such an entity. No single promoter or promoter group should have more than 40 % (forty percent) investment in the capital of the umbrella entity. The promoter shareholding can be diluted to a minimum of 25% (twenty five percent) after 5 (five) years of the commencement of business of the umbrella entity. A minimum net-worth of Rs 300,00,00,000 (three hundred crore) should be maintained at all times.
In case of any foreign direct investment in the applicant Umbrella Entity, it will have to fulfil, additionally, the capital requirements as may be applicable under Foreign Exchange Management Act, 1999 and necessary approval from the competent authority.
RBI has opened applications for the Umbrella Entity which shall be submitted till February 26, 2021.
Please find a copy of the draft Framework here.
This update has been contributed by Adity Chaudhury (Partner) and Aditi Gupta (Associate).
7A, 7th Floor, Tower C, Max House,
Okhla Industrial Area, Phase 3,
New Delhi – 110020
The rules of the Bar Council of India do not permit advocates to solicit work or advertise in any manner. This website has been created only for informational purposes and is not intended to constitute solicitation, invitation, advertisement or inducement of any sort whatsoever from us or any of our members to solicit any work in any manner. By clicking on 'Agree' below, you acknowledge and confirm the following:
a) there has been no solicitation, invitation, advertisement or inducement of any sort whatsoever from us or any of our members to solicit any work through this website;
b) you are desirous of obtaining further information about us on your own accord and for your use;
c) no information or material provided on this website is to be construed as a legal opinion and use of this website will not create any lawyer-client relationship;
d) while reasonable care has been taken in ensuring the accuracy of the contents of the website, Argus Partners shall not be responsible for the results of any actions taken on the basis of information provided in this website or for any error or omission in the website; and
e) in cases where the user has any legal issues, the user must seek independent legal advice.