The Competition Commission of India (CCI) has clarified that where Rural Cooperative Banks already operate on a proprietary Core Banking Solution (CBS) platform, a procuring authority may restrict an Request for Proposal (RFP) for migration/upgradation and maintenance of that platform to authorised partners/system integrators of the Original Equipment Manufacturer (OEM), if such restriction is justified by compatibility, data security, software integrity, and continuity of essential banking operations; such a condition is not, by itself, unfair, discriminatory, exclusionary, or abusive under Section 4 of the Competition Act, 2002.
The Court held that repeated extensions or continuation of an existing arrangement, when undertaken to maintain continuity of essential banking operations and without evidence of bias, exclusive dealing, refusal to deal, agreement, concerted practice, or appreciable adverse effect on competition, do not establish a violation of Section 3(4)(b) or Section 3(4)(d) of the Act.
In the absence of material showing that NABARD imposed restrictive conditions with the intention of favouring Infosys or excluding competitors in a manner amounting to abuse of dominance, and in the absence of evidence of collusion between NABARD and Infosys, no prima facie case of contravention of Sections 3 and 4 was made out, warranting closure of the matter under Section 26(2) of the Act, added the Court.
The Coram comprising the Chairman Ravneet Kaur, along with Members Anil Agrawal, Sweta Kakkad, and Deepak Anurag, first examined the relevant market and held that CBS services for Rural Cooperative Banks have distinct functional characteristics, regulatory compliance requirements, pricing structures, and implementation features, making them non-substitutable with generic IT software, manual banking systems, or CBS designed exclusively for commercial banks. It therefore delineated the relevant market as the “Market for procurement of CBS services for Rural Co-operative Banks in India.”
On dominance, the Commission observed that NABARD is a body corporate established under the NABARD Act, 1981, has exclusive legal authority under that statute, and no other public or private entity is similarly established to undertake development of Rural Cooperative Banks and rural development functions. Since NABARD regulates Rural Cooperative Banks and acts as a facilitator for implementation of CBS in that segment, the Commission held that NABARD holds a dominant position in the delineated relevant market.
On abuse of dominance, the Commission observed that the 2023 RFP was confined to authorised partners/system integrators of Infosys because the concerned cooperative banks were already operating on the Finacle CBS platform and the RFP was for upgradation from Finacle 7.x to Finacle 10.2.25, not for adoption of a new CBS platform. The Commission accepted NABARD’s explanation that such restriction was connected with compatibility, data security, software integrity, and access to proprietary tools and support, and held that engagement of unauthorised vendors could risk data corruption, system failure, security breaches, and financial burden.
Accordingly, the Commission found that the condition limiting participation to authorised partners/SIs of the Finacle OEM was not unfair, discriminatory, or exclusionary, and therefore did not amount to abuse of dominant position under Section 4. The Commission further observed that the extensions and renewals of the Finacle arrangement were undertaken to maintain continuity of essential banking operations, and that NABARD exercised its statutory mandate transparently, reasonably, and in a manner grounded in technical and rural banking realities.
On the Section 3 allegations, the Commission observed that the Informant had not produced evidence of any bias in favour of Infosys, exclusive dealing agreement, refusal to deal, agreement, concerted practice, or collusive conduct between NABARD and Infosys that could establish violation of Section 3(4)(b) or Section 3(4)(d). It also noted that earlier vigilance scrutiny had not found anything in the records or processes to substantiate the allegations against NABARD.
Briefly, an information was filed by Natural Support Consultancy Services Private Limited under Section 19(1)(a) of the Competition Act, 2002, alleging contravention of Sections 3 and 4 by NABARD and Infosys in relation to procurement of Core Banking Solution services for Rural Cooperative Banks. NSCSPL alleged that NABARD, which issues RFPs on behalf of Rural Cooperative Banks, had historically empanelled Infosys as OEM with Wipro as SI under the 2011 RFP, and that after repeated renewals of the original arrangement, the Finacle-based arrangement continued even beyond the contractual period.
The dispute specifically concerned the 2023 RFP issued by NABARD for identification of an application service provider for migration/upgradation of Core Banking Solution from Finacle 7.x to Finacle 10.2.25 and maintenance for 5 years across 58 Cooperative Banks in 9 States. The Informant alleged that NABARD restricted participation to system integrators authorised by Infosys, thereby excluding other service providers regardless of capability, and contended that the winning consortium selected under the 2023 RFP was only to support the existing Finacle platform and not to create any parallel CBS platform.
The Informant defined the relevant market as the market for providing CBS services to Rural Cooperative Banks in India and alleged that NABARD, being a statutory monopoly and dominant player, had imposed unfair and discriminatory conditions, restricted market access, and leveraged its dominance to confer unjustified advantage upon Infosys, in alleged violation of Sections 4(2)(a)(i), 4(2)(b)(i), 4(2)(b)(ii), 4(2)(c) and 4(2)(e). It also alleged violation of Sections 3(4)(b) and 3(4)(d) on the basis of repeated extensions and the authorised-partner condition in the 2023 RFP.
NABARD, in its response, stated that 58 State Cooperative Banks and District Central Cooperative Banks that were already on the Finacle cloud had provided written consent for NABARD to float the 2023 RFP for upgradation of Finacle from version 7.x to 10.2.25. NABARD further stated that the RFP was specifically for existing Finacle users, that any vendor authorised by Infosys for providing Finacle CBS services was eligible to participate, and that the selection process was carried out transparently through a Bid Evaluation Committee comprising representatives of participating banks.
