What is New Umbrella Entity (NUE) network?

Why in news?

• Six groupings, which included Facebook, Google, Amazon, Flipkart and others, had applied for NUE licences and all of them have fallen short of the RBI’s expectations.
• Recently, the Reserve Bank of India (RBI) is said to have put on hold licensing of the New Umbrella Entity (NUE) network, a fintech institution planned as a rival to the National Payments Corporation of India (NPCI).

What is New Umbrella Entity (NUE)?

• As envisaged by the RBI, an NUE will be a non-profit entity that will set up, manage and operate new payment systems, especially in the retail space such as ATMs, white-label PoS; Aadhaar-based payments and remittance services.
• The entity formed shall be a company incorporated in India under the Companies Act, 2013. Currently, the umbrella entity for providing retail payments systems is NPCI, which is a non-profit entity, owned by banks.
• Promoters:A promoter will hold at least 25% and up to 40% of the operator. Only those entities that are owned and controlled by Indian citizens with at least three years of experience in the payments segment can become promoters of NUEs.
• Foreign investment:Foreign companies can own a maximum of 25%, so are teaming up with local players.
• Capital required:According to the RBI guidelines, the entity will have minimum paid-up capital of Rs 500 crore, with no single promoter group holding over 40 per cent investment in the capital.
• Governance structure: The new entity will have to abide by corporate governance norms and the ‘fit and proper’ criteria for persons to be appointed to the board.