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New Umbrella Entity (NUE) for Retail Payment Systems: RBI

New Umbrella Entity

The Reserve Bank of India has decided to set up a pan India umbrella entity to boost the retail payment across the country. These entities will be called a New Umbrella Entity (NUE). RBI shall authorize these NUEs under Section 4 of the Payment and Settlement Systems Act (PSSA), 2007. 

Who is eligible to apply for New Umbrella Entity?

Any promoter or group who has an experience of three years in the payment ecosystem as an operator, service provider, or technology service provider may apply for New Umbrella Entity (NUE).

Apart from it, any entity having more than 25% of the paid-up capital of the NUE will also be deemed to be a promoter. In the case of a foreign investor, he or she is required to comply with the FDI (Foreign Direct Investment) policy and guidelines of the government of India and must also follow DIPP (Department of Industrial Policy and Promotion) and FEMA (Foreign Exchange Management Act) policies.

The applicant is required to follow corporate governance norms and should take the approval of RBI for the appointment of board members.

What are the conditions to become a New Umbrella Entity?

The primary condition to become an NUE is that the applicant must be Fit and Proper. RBI has stated that the applicant entity and the promoter should be fit and proper and must have a track record of financial integrity, good reputation and character, and honesty.

Such a person should not have incurred disqualifications such as-

  • He must not be convicted by a court for any economic offense;
  • Declared insolvent and not discharged;
  • Not financially sound; and
  • Of unsound mind.
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What are the Capital Requirements to become a New Umbrella Entity?

The entity applying for the NUE must have a minimum paid-up capital of 500 Crore Rupees. Capital allocation should be done to support or address the need for capital for managing risk, invest in technological infrastructures, for business operations, etc. RBI also disallowed from any single promoter or group to have more than 40% investment in the capital of the NUE.  

RBI requires the promoters to demonstrate not less than 10% that means 50 crore rupees, capital contribution at the instance of making the application for setting up the NUE. RBI has allowed the promoter or the promoter group shareholding to dilute a minimum of 25% after five years of the start of the business of the NUE. A minimum net worth of 300 crore Rupees shall be maintained at all times.

How will the New Umbrella Entity work?

NUE shall set up, manage and operate new payment systems especially in the retail space including but not limited to ATMs, white-label, PoS (Point of Sale) and Adhar based payments and remittance services, develop new payment method, standards, and technologies and monitor related issues in the country and internationally. 

NUE shall take care of the developmental objectives, such as the enhancement of awareness about the payment systems. It should operate in clearing and settlement systems, identify relevant risks and manage them such as settlement, credit, liquidity, and operational and also preserve the integrity of the systems. It shall fulfill its policy objectives and make sure that the principle of fairness, equity, and competitive neutrality is applied in determining participation in the system.

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It shall frame necessary rules and the related processes to ensure the safety of the system and that the payments are exchanged efficiently. NUE may carry on any other business as suitable to strengthen the retail payments ecosystem in the country.

Business plan requirement for setting up NUE

As per RBI, the application for setting up an NUE shall contain a detailed business plan covering the payments system proposed to be set up and or operated with other documents to establish its experience in the payment ecosystem.

Such a business plan shall include technology, security features, market analysis/research, benefit, if any, of such payment system, operational structure of the payment system, the time period for set up of the payment systems and proposed scale of operation, etc. The proposed organizational strategy with respect to fulfilling its responsibility as an umbrella entity will also be included in the business plan.

The application process of New Umbrella Entity

Once an entity applies for the license of NUE, scrutiny of the applications shall be undertaken by the External Advisory Committee (EAC). The committee shall provide its recommendations to the Reserve Bank of India. Board for Regulation and Supervision of Payment and Settlement Systems (BPSS) shall be the final authority for issuing authorization for setting up of NUE. The Reserve Bank shall complete the process within a six months period.

What is the need of NUE?

NUE is an entity that has been proposed by the RBI to focus on retail payments. Complying with regulations may be a frustrating task for the companies in India. According to RBI, forming an NUE will operate and manage new payment systems in the retail space, but there is no clarity as to what will be the exact role of these entities.

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If you look at the need for establishing NUEs, India already has an umbrella entity for retail payments known as the NPCI[1] (National Payments Corporation of India), and it has fared well in most payment areas to some extent.


The framework for New Umbrella Entity by the RBI is a welcome step in terms of opening up avenues for private participation in developing the retail payment infrastructure in India and introducing new technologies and systems to consumers at large. It could well lead to more synergies and innovation in the fintech industry, thereby creating competition at the root level of the payment systems.

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