Industry experts believe such entities should be led, controlled and driven by Indian entrepreneurs
But, capital constraints will force them to look outwards
Stakeholder concerns over indirect foreign ownership of proposed payments umbrella firms were not sufficient to force a change of heart at the Reserve Bank of India, which released guidelines last month permitting such investment. According to documents accessed by Mint through a Right to Information (RTI) request, foreign ownership was one of the key concerns that stakeholders had raised in their comments to the draft guidelines released in February.
The umbrella entities are expected to function as processors of retail payments and compete with the National Payments Corporation of India (NPCI), through which most of India’s digital payments are routed. Some suggestions included restricting foreign ownership at 25%, while some were of the opinion that allowing such entities to manage India’s payment systems could hurt national interests.
RBI has specified that all entities eligible to apply as promoter should be owned and controlled by resident Indian citizens, thus limiting the extent of foreign holding. The final guidelines were released in August with minimal changes to the draft which allowed foreign investment subject to fulfilling regulatory and legal requirements.
Some comments said the payment systems could go under indirect control of foreign owners, since a large number of Indian fintech companies have foreign ownership. “These foreign-funded companies, if they participate in setting up the umbrella entity, would lead to passing off control to foreign entities indirectly. Although it won’t be a direct control, there will be significant influence of funding giants like SoftBank, Tiger Global and alike which could prove detrimental to the interest of the public at large," one of the comments said.
Industry experts believe that while such entities should be led, controlled and driven by Indian entrepreneurs, capital constraints will force them to look outwards. “You might want to keep the options open for other investors to come in. While we have talent and depth, we should keep options open as requirements for funds will only increase in the coming days," said Navin Surya, chairman emeritus, Payments Council of India. A wholly-owned Indian entity does de-risk consumers from geo-political risks, he said.