The Tata Group has taken over State Bank of India and Bank of Baroda’s bid for a Reserve Bank of India (RBI) license to set up a New Umbrella Entity (NUE) for retail payments in the country, the Economic Times reported. The move to apply for a NUE license will go a long way to help the group develop and roll-out its Super App, that will compete with Reliance and Amazon’s dominance in e-commerce and retail.
The Tatas have taken over the bid by State Bank of India and Bank of Baroda, who had joined hands with HDFC Bank for the NUE. But both state-owned banks were red-flagged by the Finance Ministry to set up a rival to the National Payments Corporation of India (NPCI), the report said citing unnamed sources. The Tata’s have set up an entity called Ferbine Pvt. Ltd for the purposes of a NUE license. While HDFC Bank and Kotak Mahindra Bank, each have a 9.9% stake in the entity, Airtel Digital will buy a 10% stake, the report said. Mastercard and PayU are also part of the Tata-Kotak-HDFC Bank consortium.
While Mastercard is a dominant card network company in the country, PayU is among the leading payment gateway provider. HDFC Bank and Kotak Mahindra Bank are both leading private banks with a strong digital footprint. According to NPCI data, HDFC Bank processed 138 million Unified Payment Interface (UPI) transactions on the whole, Kotak Mahindra Bank processed 49.77 million transitions in January 2021. Kotak’s apps processed 1.88 million UPI transactions worth Rs 343 crore, while HDFC Bank’s apps’ processed 1.52 million UPI transactions worth Rs 244 crore last month. Tata does not have a third-party UPI app, but it has a license to operate white-label-ATMs in the country.
According to the RBI’s NUE guidelines, the new license holder to operate and develop retail payments platforms can be profit-making unlike the NPCI which is currently a not-for-profit entity. The NUE is expected to develop interoperable payments solutions, that can work with the NPCI’s existing payments platforms, to help grow the digital payments pie in the country by attacking new use-cases and target markets. While the RBI has invited applications till the end of February 2021, an expert committee will evaluate the applications after which the Board for Regulation and Supervision of Payment and Settlement Systems will take a final call on granting licenses, within a six-month period. The NUE guidelines state that the license holder will need to create new solutions for ATM networks, point-of-sale (PoS) services, Aadhaar-based payments and remittances.
Apart from the Tata-Kotak-HDFC Bank combine, Paytm has tied up with Ola and IndusInd Bank to bid for a NUE license, in addition to a consortium of Amazon-ICICI Bank-Axis Bank and another led by Reliance Industries and So Hum Bharat Digital. On Friday, the Reserve Bank of India (RBI) extended the deadline for submitting applications for an NUE license to March 31 this year, from February 26. “Requests have been received from various stakeholders including Indian Banks’ Association for extending the timeline, keeping in view the COVID-19 related disruptions and inconveniences. It has been accordingly decided to extend the timeline,” the RBI said.
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