Should NPCI, BHIM Be Under RTI? CIC Forms Division Bench to Decide

The NPCI , which owns BHIM UPI, is run by PSU banks and funded by taxpayers’ money.

A divison bench of two information commissioners will decide whether digital payments entity NPCI should be under the RTI’s purview. 

(Photo Courtesy: Aroop Mishra/The Quint) 

The Central Information Commission (CIC), in an order on 18 July, declared that a complaint brought before it “involves a substantial question of law”.

The question before the CIC is “whether National Payments Corporation of India (NPCI) is a public authority and whether the information sought is required to be disclosed,” the order states.

After five hearings at the CIC headquarters in New Delhi since 1 November 2018, the petition, being heard by Information Commission Suresh Chandra, has been referred to a division bench.

The Bench, comprising Chandra and Neeraj Kumar Gupta, has been constituted to adjudicate on the matter on 1 August.

Questions about the NPCI’s nature: whether it is public or private, have been raised several times since its inception in 2009. Even though it is funded by taxpayers’ money and promoted by Prime Minister Narendra Modi, the corporation maintains that it is not a public entity.

The contention arises from the fact that while it is incorporated as a non-profit organisation, its majority shares are held by public sector banks. A majority of its board members are from public sector banks, and its products, like the BHIM app, receive funding and promotion from the government.

A copy of the CIC order dated 18 July. (Photo: Central Information Commission)

The Confusion With NPCI

The NPCI describes itself as “an umbrella organisation for operating retail payments and settlement systems in India”. It was set up as “an initiative of the Reserve Bank of India (RBI) and Indian Banks’ Association (IBA) under the provisions of the Payment and Settlement Systems Act, 2007, for creating a robust Payment & Settlement Infrastructure in India.”

The organisation, however, has been established as a non-profit under Section 25 of the Companies Act (now Section 8 of Companies Act 2013) ‘considering the utility nature of the objects of NPCI,’ the official website cites.

However, petitioner Neeraj Sharma has challenged this characterisation of the organisation. He contends that that the government wields considerable influence over the NPCI by virtue of how it is owned, controlled and funded.

The Government of India wants to interfere in the functioning of the NPCI and at the same time doesn’t want it to be accountable to the citizens irrespective of the fact that NPCI clearly performs a public function of routing subsidies of states.

Neeraj Sharma, Appellant 

On the question of whether NPCI is performing a public function, Prasanna S, a lawyer who assisted petitioners in the Aadhaar cases before the Supreme Court said, “It is performing a public function and it is a natural monopoly backed by the government.”

“It is clearly substantially funded by the government, the public sector banks clearly have a substantial share in their ownership, PSU banks are effectively controlled and owned by the government.” he added.

A Conflict of Interest?

Apart from being owned entirely by banks, the NPCI has also come under fire from fintech wallet companies such as PayTM and PhonePe regarding issues of ‘neutrality’.

A Times of India report said in 2017 that 74.5 percent of the shareholding is by the ten promoter banks. However, 58 percent of the shares are held by PSU banks.

The same report claimed that at a NITI Ayog meet in 2017, payment industry leaders like Paytm’s Vijay Shekhar Sharma and PhonePe’s Sameer Nigam had questioned the NPCI’s move to allocate the government outlay of Rs 495 towards the BHIM app instead of offering it to all apps. They had urged Prime Minister Narendra Modi to ensure the neutrality of NPCI.

BHIM, a privately-owned application, is managed and operated by the NPCI, a private entity. It has, however, received wide promotion and funding by the government. Finance Minister Arun Jaitley, in his budget speech in 2017, had also announced schemes for the app.

“From an RTI reply by Reserve Bank of India, I came to know that RBI had deputed Mr AP Hota as Managing Director and Chief Executive for the first years of its incorporation,” said Sharma.

“That itself means that RBI has a say in the incorporation of NPCI and it is evident that NPCI performs public functions.” he added.