Exclusive: How the RBI Forced National Payments Body to Hire Government Favourite as CEO

A few board directors are likely to resign in protest in the coming weeks.

The RBI’s intervention has raised troubling questions.

Key highlights:

1) In October 2017, NPCI board voted decisively to appoint Visa’s Uttam Nayak as CEO and MD.

2) The decision was conveyed to the central bank in a letter that asked for approval from a ‘fit and proper’ perspective.

3) In December 2017, the RBI sent a letter directing the payments body to appoint Dilip Asbe instead.

4) Apart from RBI governor and the head of SEBI, will NPCI CEO also be a political appointment?


New Delhi: The Reserve Bank of India’s decision to interfere in the National Payments Corporation of India’s recent search for a new CEO by overruling the board’s choice and forcing the appointment of a candidate seen as more amenable to the Modi government’s digital payments agenda is kicking off a public and corporate governance crisis.

This unprecedented series of developments – according to multiple people with direct knowledge of the matter – has prompted at least three independent directors of the payments body’s board to file notes of dissent that characterise the central bank’s actions as an attack on “good governance”.

The Wire has learned that a few board directors are considering handing in their resignation letters in protest in the coming weeks.

The National Payments Corporation of India (NPCI) – a not-for-profit company that was promoted by ten major banks and which currently manages the infrastructure underpinning some of India’s most important payment systems – had in July 2017 kicked off a search for a new boss in anticipation of long-time CEO A.P Hota stepping down in August 2017.

In January 2018, the payments body announced the appointment of Dilip Asbe as its new managing director and chief executive officer. According to two sources, Asbe, an NPCI insider and its first employee, enjoyed the backing of both the broader ‘Digital India’ and Aadhaar tech community and the prime minister’s office (PMO).

Dilip Asbe. Credit: www.npci.org.in

However, The Wire has learned that in October 2017, the NPCI’s board of directors had voted decisively to appoint an altogether different candidate as CEO – a prominent payments industry official.

Internal NPCI documentation from the time shows that at the company’s board meeting on October 12, 2017, it was decided that the position of MD and CEO would be offered to Uttam Nayak – Visa’s former country manager for India and currently the company’s senior vice-president of digital for emerging markets.

It was also proposed that a separate position of executive director could be created and offered to Asbe, who at the time was acting CEO and a short-listed candidate for the full-time position.

A letter to this effect was sent to the RBI later that month, informing the banking regulator of the board’s decision, asking for approval from a “fit and proper perspective”.

However, correspondence between the RBI and NPCI in December 2017 shows that the central bank essentially disagreed with the board’s CEO choice and over-turned the final outcome of the four-month long process.

A final letter signed by the central bank’s executive director S Ganesh Kumar, dated December 29, 2017, notes that it took into account preferences expressed during the selection process and states that “Shri Dilip Asbe, current CEO-in-charge, has been found fit and proper to be appointed as MD and CEO of NPCI”. The letter also directs the board to “take immediate action accordingly and confirm the same to RBI”.

At NPCI’s January 8, 2018 board meeting, a resolution was adopted that effectively accepted the RBI’s directive by appointing Asbe.

Dissent notes, resignations

However, in the days after January 8, at least three independent directors who sit on the NPCI board – Santanu Paul, Satish Pradhan and Rama Bijapurkar – have written dissent notes that sharply criticise the RBI’s decision to subvert the board-led process and direct the-then chairman (B Sambamurthy) to appoint Asbe, a candidate that the board evaluated but finally chose not to select.

The dispute raises a question mark over the nature of the relationship between the central bank and the payments body.

At least two of the dissent letters talk of “undue and external” influence being exerted on the selection process in favour of Asbe, the candidate that was ultimately appointed. They also accuse the central bank of having “gone beyond its mandate” by selecting a CEO of its own preference.

“While NPCI board members were able to resist pressure from external forces during the CEO selection process, it appears those external forces ultimately prevailed. As a result, NPCI will now be led by a CEO who will take his cues from elsewhere,” one of the dissent notes, which The Wire has seen, says.

“The board spent 4 months reflecting on the pros and cons of each CEO candidate and weighed every item of input it received with extraordinary care before taking a balanced decision. By tossing aside their CEO nomination, by not engaging in consultation with the board on this matter of great consequence, and by nominating an alternative CEO, the RBI directive signals that the opinion of the NPCI board is largely irrelevant,” the note adds.

The tension between the RBI and the NPCI’s board was compounded in the last week of January 2018 when the central bank sent a letter invoking Section 17 (b) of the Payments and Settlement Systems Act and directed it to appoint Biswamohan Mahapatra as director and chairman of the payments body.

Last Friday, the NPCI quietly announced the same in a press release.

Section 17 b states that if a “payment system or system participant” is about to “engage in any act… that results in systemic risk being inadequately controlled’ – or if this action “likely to affect the payment system” – the central bank may issue directions that require the entity to perform acts that “remedy the situation”.

The RBI letter, however, does not specify what systemic risk was being inadequately controlled or how Mahapatra’s appointment would ‘remedy’ or help quell that risk. Indeed, multiple sources close to the situation complained of how the RBI’s instruction to the board to appoint Asbe came with zero prior discussion or explanation.

Selection process subverted

In July 2017, multiple media outlets reported that the NPCI had kicked off a search process for a new CEO. The job application put out in the form of newspaper advertisements called for interested applicants with 20 years of experience in financial services.

By August 2017, the payments body had recruited Korn Ferry International, a US-based executive headhunting firm, to narrow potential applicants to seven suitable candidates.

Uttam Nayak. Credit: exchange4media.com

People familiar with the recruitment and selection process told The Wire that these seven people were then shortlisted to just three candidates on the recommendations of an interview panel that was staffed by external experts.

The next stages included a review by a separate board committee and the nomination and remuneration committee that shortlisted it to just two candidates – Visa’s Uttam Nayak and Dilip Asbe.

Sources told The Wire that during the ‘outside expert’ stage, questions were put forth to the future CEOs on how they would resist attempts made by senior government officials and bureaucrats to influence the functioning of the organisation. Other interview themes at other levels of vetting included questions on the future of the NPCI as a non-profit organisation, their strategy for BHIM (a UPI-based money transfer application, and pet project of Prime Minister Narendra Modi) and questions on broadbasing the shareholding of the company.

Ultimately, in a ballot vote on October 12, 2017, the board selected Nayak. Later that a month, the-then board chairman B. Sambamurthy sent a letter to the RBI, informing the central bank of its decision to offer the CEO post to Nayak and to create a separate position for Asbe, that of executive director.

The letter to the RBI – a copy of which has been seen by The Wire – notes that the NPCI’s board requested the central bank’s approval only from a “fit and proper perspective”.

A key theme of the dissent notes is how the RBI’s directive to appoint Asbe goes far beyond rejecting Nayak – the board’s candidate – on fit and proper grounds.


The dispute over the imposition of Asbe raises a question mark over the nature of the relationship between the central bank and the payments body.

Though set up as a Section 25, non-profit company, the NPCI’s origins lie with the RBI. The payments body’s website states that it was licensed by the central bank to operate “various retail payment systems” under the Payment and Settlement Systems Act, 2007.

While its initial responsibilities primarily included the national financial switch (NFS) and other payment systems such as the cheque truncation system (CTS) and immediate payment service (IMPS), it has quickly became hugely influential in India’s ongoing push to expand digital payments.

Credit: PTI

The Indian Banks Association (IBA) functioned as a facilitator in setting up the NPCI and approached Infosys founder N.R. Narayana Murthy to become its first non-executive chairman. It was, however, eventually promoted by 10 major public sector and private sector banks (accounting for over 70% of the entity’s shareholding at last count) which is why most of the board’s directors are bank representatives.

However, many analysts and commentators have pointed to the potential conflicts of interest in NPCI’s functioning as it is essentially a provider of infrastructure (UPI, Unified Payments Interface) and an operator of consumer products (BHIM).

The Watal committee report on digital payments, made public in late 2016, noted that it would be desirable if the present ownership structure of NPCI would be “diffused”, with 51% of the paid up equity share capital held by the public, with no person holding more than 5% of the shares of the company.

Furthermore, in its remarks on “shareholding and governance of retail payment organisations”, it specifically calls out NPCI, noting that its board should have “majority ‘public interest directors’– independent directors representing the interests of consumers in payments markets…”

The Watal recommendations are yet to be acted on. In August 2017, shortly after former NPCI CEO A.P. Hota stepped down, The Times of India reported how several private digital payments players like Paytm and PhonePe reiterated the need to make the NPCI a more “neutral body” at a Niti Aayog event.

In particular, they brought up issues such as NPCI’s backing of the BHIM app and how a Central government outlay of nearly Rs 500 crore for cash-backs and bonuses had been allocated mostly only towards usage of BHIM.

Asbe versus Nayak

There appears to be little consensus on whether the NPCI board absolutely requires permission from the RBI, beyond simple ‘fit and proper’ approval, while choosing its future management. One former senior NPCI official, who declined to be identified, found it surprising that the decision went to the central bank for approval at all.

An independent NPCI board member, however, told The Wire that this was ultimately a moot point – after all, as the appointment of Biswamohan Mahapatra as new chairman showed, the RBI appears to have unlimited power with Section 17 (b) of the Payments and Settlement Systems Act.

It is in this context that the official preference for Dilip Asbe as CEO assumes significance. During the course of The Wire’s reporting, multiple sources within the NPCI and the broader industry offered up two slightly different yet interconnected narratives on the official preference for his appointment.

While The Wire could not independently verify this claim, at least two sources emphasised that senior RBI officials had no particular horse in the race and were instead influenced by the backing of officials within the prime minister’s office (PMO). One of these sources stated that for an institution of national importance to choose an outside candidate who, though an Indian, was from an American multinational company, could “look bad”.

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The Wire sent a set of questions to the PMO and this story will be updated if and when a response is received.

Others, however, pointed more towards the support Asbe had amongst the ‘Digital India’ and Aadhaar community as having influenced the RBI’s decision. For instance, The Wire learned that Infosys chairman Nandan Nilekani, who serves as an ‘advisor’ to NPCI but does not sit on the board, batted heavily in favour of Asbe. A questionnaire has also been sent to Nilekani and this story will be updated if a response is received.

On January 18, ten days after his appointment, Asbe was facilitated as the “Digital Person of the Year” by the Internet and Mobile Association of India, in part of because his long-standing work in driving platforms like UPI.

“There was a perception that if Uttam Nayak came in, he may have derailed the BHIM project even though there was absolutely zero evidence to indicate that he would,” a senior industry official with knowledge of the matter said.

“At the end of the day, it’s become clear that there are now three major financial executive positions that are appointments of political importance. It used to just be the post of RBI governor and SEBI Chairman. Add one more to that, the CEO of NPCI.”

Note: This story was edited on February 15th to add more text from one of the notes of dissent.