NPCI's plan to acquire a stake in ONDC faces RBI hurdle, says report

Banking regulator flags conflict of interest concern

National Payments Corporation of India’s (NPCI’s) plan to acquire a stake in government-backed Open Network for Digital Commerce (ONDC) may be delayed. This is because the Reserve Bank of India (RBI) has raised concerns over a potential conflict of interest, people aware of the matter said.
 

NPCI had evinced interest in developing the payment and settlement architecture of the ONDC network and wanted to acquire around 10 per cent stake in the government-backed start-up.
 

The banking regulator has sought more time to study the proposal as it may result in conflict of interest.
 

“NPCI has run into a regulatory issue. While it wants to develop a payments and settlement system for ONDC, RBI feels that if it acquires a stake in ONDC, then it will cease to become a neutral party. It then becomes an interested party,” one of the officials cited above told Business Standard.
 

“RBI wants to understand how NPCI will be an independent party here. That’s why the banking regulator is yet to give any clearance to NPCI,” the official said.
 

NPCI runs electronic retail payments infrastructure in India. It offers products such as card payments scheme RuPay, instant payments system Unified Payments Interface (UPI) and Immediate Payment Service (IMPS), among others. It is administered by the central bank.
 

The company’s managing director (MD) and chief executive officer (CEO) Dilip Asbe is also a member of the advisory council of ONDC.
 

RBI and NPCI did not respond to the emailed queries sent by Business Standard.
 

An initiative of the Department for Promotion of Industry and Internal Trade (DPIIT), ONDC aims to promote open networks for exchange of goods and services over digital or electronic networks. It is an enabler for e-commerce expansion into the country.
 

It was established in December 2021 as a private sector-led not-for-profit company to manage the implementation of interoperability in digital commerce.
 

The larger idea behind ONDC is to onboard small, local sellers, who have never been on any digital platform in the past and expand their reach. The Centre has put in Rs 10 crore seed money into it.
 

As many as 20 companies, including top banks, such as State Bank of India, Punjab National Bank, Bank of Baroda, HDFC Bank and ICICI Bank, among others, have already invested in the company.
 

As much as Rs 250 crore has already been put into the company, another official said.
 

As on October 3, ONDC has six directors — Adil Zainulbhai, chairman of Quality Council of India, Suresh Sethi, MD and CEO of Protean eGov Technologies, Arvind Gupta, co-founder & head, Digital India Foundation, Thampy Koshy, CEO of ONDC, Ritesh Tiwari, chief financial officer (CFO) of Hindustan Unilever and Anil Agarwal, additional secretary at DPIIT.
 

On September 30, ONDC network went live with select consumers in Bengaluru. A nationwide roll out will follow after the beta testing on consumers is scaled up and expanded to other cities.

RBI VIEW

• NPCI wants to develop the payments and settlement architecture of the ONDC network
• RBI feels if NPCI acquires a stake in ONDC, then it will cease to become a neutral party