State Bank of India is planning to set up an entity to rival National Payments Corporation of India (NPCI). This attempt is done by SBI to enter the country’s highly competitive, yet fast-growing, digital payments ecosystem as a primary stakeholder. The possibility of applying for a license under the Reserve Bank of India’s New Umbrella Entity (NUE) framework for retails is being “examined” by the senior management of India’s largest lender.

The central government has opened the window of applications under the framework for the NUE which was released by the Reserve Bank of India. Entities receiving approval can set up a payments company for owning and operating a pan-India digital payments network, exercising the same powers as NPCI. The spokesperson said that, “The framework is also being examined by SBI, as the presence of an additional entity may lead to further deepening of the digital retail payments ecosystem.” He added, “This will further increase the reach and expanse of financial inclusion, since many more innovative and affordable products will be made available on this platform.”

The talks of new applications being accepted are at a nascent stage which means their existence may be in the future, it is believed that one of the ways of the new payment entity could be structured through its combination of ownership-based model. In this combination SBI as a promoter, could provide state-owned banks to form a consortium.

Another possibility could be SBI partnering with fintech companies which could help the state-owned lender offer some of its digital initiatives through its banking channel, said the person. SBI will need to provide at least Rs 500 crore as paid-up capital if the entity does get the green light, as per the RBI guidelines.

The NPCI controls over 60% of the volumes through crucial channels such as the Unified Payments Interface, Immediate Payment system and National Financial Switch. SBI is already a shareholder in the NPCI, which is a ‘not-for-profit’ entity registered under Section 8 of the Companies Act and owned by a consortium of leading public and private sector banks.

The SBI-owned entity, however, would likely be a ‘for-profit’ company. SBI’s operational and business plans for its proposed payments company are yet to be ascertained.

The RBI has set February 2021 as the deadline for interested entities to submit applications. The central bank hopes to finish the process of scrutinising the applications in another six months.