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RBI governor Shaktikanta Das had recently said that the National Payments Corporation of India will be given the option to convert itself into a for-profit entity to withstand competition from entrants in the payments space. Mint looks at the impact of this could have.

What is NPCI’s role in the payments infra?

NPCI runs the electronic retail payments infrastructure in India. Administered by RBI and Indian Banks’ Association (IBA), NPCI was established in 2009 and operates as a not-for-profit organization, taking into account that digital payment is a public good. It provides a simple, safe, and affordable mechanism, thereby driving the government’s vision of financial inclusion. Card payment scheme RuPay, payments system Immediate Payment Service, Unified Payments Interface, National Electronic  Toll  Collection, Aadhaar Enabled Payment System, and Bharat Bill Payment System are some of the products it offers.

Will it ever become a for-profit company?

Some quarters have demanded that NPCI should be converted into a for-profit organization to survive competition. Das recently said that with the New Umbrella Entity (NUE) for retail payments coming in, NPCI will also have the option of becoming a for-profit company. This will ensure that there is a level playing field for the entrants and NPCI, which until now has been a monopoly. However, conversion into a for-profit organization will require approval from the finance ministry, RBI, and an amendment in the Payment and Settlement Systems Act, under which the NPCI was constituted.

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How will NPCI turning for profit  impact  the  landscape?

Becoming a for-profit entity could mean more liquidity for NPCI, which will enable it to compete with umbrella entities likely to be set up by technology giants gearing up to bring innovation in Indian’s growing digital payments landscape. Experts believe that RBI should ensure that the NPCI does not have special position and privilege. A level-playing field is must.

How will it impact the end customers?

Customers will stand to gain as the service offerings could increase. With more liquidity, NPCI will be able to level increase its risk-taking appetite, enhance infrastructure, while experimenting and foraying into new ventures. Recently, NPCI raised 82 crore via private placement of 4.63% of its equity shares to 19 new banks, non-banks and parent entities of digital payment companies. Experts believe that NPCI will now be able to diversify and tie up with fintech companies to provide value-added services.

Will investors benefit from NPCI  conversion?

A for-profit status will allow the retail payments company to pay dividend to its shareholders. NPCI has 67 shareholder entities. This could mean more liquidity for the investors. It will also raise NPCI’s ability to raise funds from market and further use them for various initiatives. This is key, given the launch of NPCI’s international arm to expand UPI and card payment network RuPay in other countries. Several countries across Asia, Africa and the Middle East have evinced interest in replicating India’s retail payments model.


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