Indian corporates form consortiums with banks, Big Tech for NUE licences

NUE consortiums — Image by StanciuC | Bigstockphoto

Some of the top Indian corporates have partnered with global Big Techs and payments companies to form as many as four consortiums to apply for the license with the Reserve Bank of India (RBI) to become New Umbrella Entities (NUE) that will allow them to create a payments network similar to the Unified Payments Interface (UPI).

Unified Payments Interface (UPI) is run by the National Payments Corporation of India (NPCI), the umbrella organisation for all retail payment systems in the country.

In the last two weeks, Reliance Industries Limited (RIL), Tata Group and Bharti Airtel have formalised plans and have joined hands with HDFC and Kotak banks and technology majors like Facebook and Google to form new consortiums.

RIL has partnered with Google, Facebook and Infibeam Avenue to set up a New Umbrella Entity (NUE), while Bharti Airtel and Tata Group have joined hands with HDFC, Kotak and Mahindra Bank, and PayU and MasterCard to set up NUEs.

Last week, India’s Tata Group took over State Bank of India’s bid for a New Umbrella Entity (NUE) payments licence after the state-run lender’s bid was flagged by the finance ministry for potential competition risk, as per a report by the Economic Times.

Tata Group’s subsidiary Ferbine Pvt. Ltd will hold the majority stake in the NUE. Airtel is also buying a 10% stake in Ferbine, while HDFC Bank and Kotak Mahindra Bank have already picked up 9.9% each in the venture.

RIL’s NUE, on the other hand, will be co-promoted by Infibeam Avenues’s subsidiary So Hum Bharat. Facebook and Google will hold smaller stakes. Navin Surya, a payment industry veteran, has been appointed managing director and chief executive of this NUE.

The other two NUEs are promoted by Amazon and Paytm.

Paytm, India’s most valued fintech startup, has joined hands with Uber’s Indian rival, Ola, to apply for the NUE license in partnership with IndusInd bank. On the other hand, Amazon roped in ICICI and Axis banks along with PineLabs, Visa and BillDesk to apply for the license last week.

In August last year, the Reserve Bank of India allowed the formation of an NUE which that can set up a payments company for owning and operating a pan-India digital payments network and exercise the same powers as NPCI, which currently offers services like managing ATMs, point of sales (PoS) machines, digital payments and remittances.

Industry executives told the publication that an NUE license would allow the entity/consortium to gain greater autonomy in processing digital payments and further help it establish a presence in the financial services ecosystem through value-added lending and insurance services.

International players like Google, Facebook and Amazon are looking to corner a bigger share of the Indian payments market as digital transactions grow by leaps and bounds. All three companies already offer digital payment services in the country.

The RBI may take another six months to study all four proposals.

The Economic Times reported that the central bank might only allow only two NUE licences. “Foreign investments, along with competition and data ownership risks, will also be evaluated by external regulatory authorities, including India’s Competition Commission (CCI)…RBI will also check for any Foreign Exchange Management Act (FEMA) violations,” it reported citing sources.

The RBI on Friday extended the deadline to submit applications to March 31, following a plea by the Indian Banks’ Association.