CCI Finds No Anti-Competitive Conduct By NABARD In Core Banking Solution Procurement Involving Infosys

Although the National Bank for Agriculture and Rural Development is dominant in the market for procurement of core banking solution services for rural cooperative banks, the Competition Commission of India has found no prima facie case of abuse of dominance or anti-competitive agreement in a case involving Infosys Limited.

A coram comprising Chairperson Ravneet Kaur and Members Anil Agrawal, Sweta Kakkad, and Deepak Anurag passed the order closing the information under Section 26(2) of the Competition Act.

The information was filed by Natural Support Consultancy Services Private Limited alleging contravention of Sections 3 and 4 of the Act by NABARD and Infosys in relation to the procurement of Core Banking Solution services for rural cooperative banks.

NABARD facilitates implementation of Core Banking Solution services for such banks by issuing Requests for Proposal, where two key roles are involved, Original Equipment Manufacturer (OEM) and System Integrator (SI).

Pursuant to a 2011 Request for Proposal, NABARD empanelled Infosys as the Original Equipment Manufacturer and Wipro as the System Integrator, along with Tata Consultancy Services as both Original Equipment Manufacturer and System Integrator. The arrangement, initially for five years, was extended multiple times till December 31, 2022. Thereafter, following Wipro's withdrawal, the engagement continued by conduct with Infosys' Finacle platform till December 31, 2023 and thereafter.

In October 2023, NABARD issued a fresh Request for Proposal for migration and upgradation of Core Banking Solution from Finacle 7.x to Finacle 10.2.25 for banks already using the platform. The Request for Proposal restricted participation to system integrators authorised by Infosys. A consortium led by Dynacons Systems and Solutions Limited was selected as the successful bidder.

The informant alleged that the continued engagement with Infosys and the restrictive eligibility condition in the 2023 Request for Proposal indicated an anti-competitive arrangement. It further alleged that NABARD imposed unfair and discriminatory conditions favouring Infosys, thereby abusing its dominant position.

Delineating the relevant market as the “market for procurement of core banking solution services for rural cooperative banks in India,” the Commission held that NABARD occupies a dominant position given its statutory role and the absence of any comparable entity performing similar functions.

On the allegation of abuse of dominance, the Commission held that restricting participation to authorised Finacle partners was justified since the banks were already operating on the Finacle Core Banking Solution platform and the upgrade required compatibility, data security and system integrity.

“Only authorized partners have access to proprietary tools and support from Infosys and engagement of unauthorized vendors could risk data corruption, system failure, security breaches, financial burden etc.,” the Commission observed.

On the allegation of an anti-competitive agreement, the Commission noted that a procuring authority has the discretion to prescribe eligibility and technical and financial conditions. It held that the continuation of the Finacle arrangement and the restriction in the 2023 Request for Proposal were not restrictive in nature.

“The extensions and renewals were done to maintain continuity of essential banking operations. NABARD exercised its statutory mandate transparently and reasonably. The RFP was open, objective, and nondiscriminatory, grounded in technical and rural banking realities," the Commission said, adding that there was no evidence of bias toward Infosys or of any exclusive dealing arrangement or refusal to deal.

Holding that no prima facie case of contravention of Sections 3 or 4 of the Act was made out, the Commission closed the matter.