which are vying a larger portion of India’s digital pie through the Reserve Bank of India’s (RBI) New Umbrella Entity (NUE) route, are now having second thoughts after several legal experts flagged conflict of interest, four people familiar with the matter said.
In the last few weeks, legal experts advising some of the consortiums as well as payment giants have said that conflict of interest cannot be ruled out.
“The fear emanates mainly from the consortiums, which are very cautious at a time when the competition has become tough,” said a person aware of the development. Another person aware of the development said that the fear started growing after reports that the finance ministry
has raised concerns over the plans of State Bank of India, HDFC Bank and Bank of Baroda (BoB) to participate in the NUE race.
ET had first
reported about this on February 19. “The government doesn’t want public sector banks, which SBI and Bank of Baroda are, to compete against RuPay and UPI that are run by the National Payments Corporation of India (NPCI),” ET reported.
“At this point, two of the participants (in a consortium) also raised concerns over how we could then have payment giants with us in NUE. In absence of any clarity for now, it was decided that it’s only wise to first get the licence and then approach this problem,” a senior executive of an entity, which is part of one of the consortiums, told ET.
As of now, four consortiums seem to be competing for NUE. This would include one led by
Amazon and Axis Bank, second led by
Reliance Jio, Google, Facebook and Infibeam Avenues, third led by
Tata Group and the fourth that includes
Paytm and Ola. All the consortiums now have time till March 31 to submit their bids after the RBI extended the deadline last Friday.
Sources told ET that both the payment giants were in talks with at least three of the four consortiums.
MasterCard and Visa did not offer comment for this story.
“If you ask me, I don’t see any conflict, but then it could be argued that why would someone help build a platform that may in some way compete with their core business,” a person aware of the development said.
With NUE, the government hopes to build a settlement system similar to Unified Payments Interface (UPI). The system would be focused on small and medium enterprises, merchants and consumers. The RBI had in August 2020 issued guidelines for creating a “for profit NUE”. As per the guidelines, all players are required to disclose their plans of partnering or any intention of equity sale when they submit their proposals for NUE.
While it’s still not clear how many players may be given the licence, it is understood that at least two of the consortiums could end up winning the NUE bid.