Table of Contents
| Origins of the NPCI |
| Subsidiaries of the NPCI |
| Services of the NPCI |
| Conclusion |
A secure and strengthened payment system is a sign of a financially secure and developed nation.
India is on the fast track to becoming a developed nation and the country’s economy is one of the main aspects that will contribute towards the status.
The National Payments Corporation of India (NPCI) is an umbrella organisation that operates retail payment and settlement systems across the country.
Origins of the NPCI
Founded on the 19th of December, 2008, the National Payments Corporation of India was established by the Reserve Bank of India and the Indian Banks’ Association to create a strong payment and settlements’ infrastructure in the country.
The NPCI had ten promoter banks, namely:
1)The State Bank of India
2)Punjab National Bank
3)Canara Bank
4)Bank of Baroda
5)Union Bank of India
6)ICICI Bank
7)Citi Bank
8)Bank of India
9)HDFC Bank
10)HSBC
However, in 2016, the shareholding was diluted to include 13 additional public sector banks, 15 additional private sector banks, 1 additional foreign bank, 10 multi-state co-operative banks and 7 regional rural banks.
The non executive chairman of the directorial board is Biswamohan Mahapatra. The board also consists of nominees from the Reserve Bank of India and nominees from the ten core promoter banks.
The current managing director and Chief Executive Officer of the NPCI is Dilip Asbe.
Subsidiaries of the NPCI
The National Payments Corporation of India(NPCI) has two key subsidiaries, namely NPCI International Payments Limited and NPCI Bharat BillPay Limited.
1) NPCI International Payments Limited (NIPL)
The NIPL is a subsidiary which is made to take the NPCI’s product to the global market.
The primary focus of the NPCI International Payments Limited is the internationalisation of RuPay and Unified Payments Interface(UPI) which are key services of the NPCI.
In 2021, a Merchantrade Asia, a Malaysian company, partnered with NIPL to send remittances to India through the UPI infrastructure.
In France, NIPL has teamed up with Lyra, a French proximity payments and e-commerce firm to make it easier for UPI payments to be accepted in the country. The strategic partnership guarantees a smooth integration of the UPI payment method.
The NIPL, in partnership with the Central Reserve Bank of Peru, will be collaborating to establish a quick payments infrastructure in Peru, which is similar to UPI. This agreement is also backed by the Reserve Bank of India.
2) NPCI Bharat BillPay Limited
Started in April 2024, NPCI created a new subsidiary for Bharat Bill Payment Systems to increase business to consumer segment growth, especially for small businesses.
This subsidiary was made in view of growing traffic and workload from UPI, IMPS, Aadhar Enabled Payment System and National Electronic Toll Collections.
Services Provided by the NPCI
The National Payments Corporation of India(NPCI) provides 16 services, to enable payments for purchase, travel, bill payments and many more necessities.
The services provided by the National Payments Corporation on India are:
1)Aadhaar Enabled Payment System
2)Bharat Bill Payment System
3)Bharat QR
4)BHIM
5)Cheque Truncation System
6)Digital Rupee
7)Immediate Payment Service
8)National Automated Clearing House
9)RuPay Contactless
10)National Electronic Toll Collection
11)National Financial Switch
12)RuPay
13)Unified Payments Interface
14)UPI 123Pay
15)Digital Payments Score
16)BHIM Aadhar Pay
1)Aadhaar Enabled Payment System
It is a network of micro-ATMs which use Aadhaar as a mode of authentication. It is a bank-led model which allows basic interoperable banking transactions at PoS through the business corespondent of any bank using Aadhaar as authentication.
The Aadhaar Enabled Payment System had a transaction value of ₹22,850 crores in January 2024.
2) Bharat Bill Payment System
The Bharat Bill Payment System, also known as Bharat Connect, is an integrated bill payment system in India. It offers interoperable and accessible bill payment service to customers through a network of agents of registered members as Agent Institutions (AI). This enables multiple payment modes, and providing instant confirmation of payment.
The Bharat Bill Payment Central Unit (BBPCU), is responsible for setting business standards, rules and procedures for technical and business requirements for all the participants and requirement.
The BBPCU, also undertakes clearing and settlement activities related to transactions routed through Bharat Connect.
Existing bill aggregators and banks are envisaged to work as Operating Units to provide an interoperable bill payment system.
Payments may be made through the Bharat Connect using cash, transfer cheques, and electronic modes. Bharat Connect has also been integrated with the Unified Payments Interface (UPI) for instant payments through UPI enabled smartphones.
On 6 August 2022, the Reserve Bank of India allowed BBPS cross border inward billing facility for Non-resident Indians.
This enables NRIs to directly pay utility bills, education fees, municipal tax and insurance-related payments without the need to send money first to a resident Indian bank account.
The Bharat Bill Payment System or Bharat Connect is a one-stop ecosystem for payment of all bills. It provides an interoperable and accessible bill payment service to all customers across India with certainty, reliability and safety.
3) Bharat QR
BharatQR is developed by the NPCI, along with Visa and Mastercard.
The system was launched in September 2016. It facilitates users to transfer their money from one source to another.
The money transferred through BharatQR is received directly in the user’s linked bank account.
The system helps in enabling digital payments to reduce the usage of card machines for payment.
Although, BharatQR primarily works by scanning QR codes, it is not the only way to make payments.
Users can pay through Aadhaar number, UPI payment address or through account number and IFSC code thus, minimising the need to pay using debit and credit cards.
NPCI, Mastercard and Visa developed BharatQR with provisions for three additional fields: bank account and IFS (Indian Financial System) code, Unified Payments Interface (UPI) and Aadhaar.
These additional fields provide banks the option to populate them as QR-based payments scale in the country.
4) BHIM
Bharat Interface for Money(BHIM) is a mobile app based on the Unified Payment Interface( UPI). It is named in honour of Dr. B.R Ambedkar.
Launched on 30 December 2016, BHIM is intended to facilitate e-payments directly through banks and encourage cashless transactions.
The application supports all Indian banks which use UPI, which is built over the Immediate Payment Service (IMPS) infrastructure and allows the user to instantly transfer money between 170 member banks.
5) BHIM Aadhar Pay
BHIM Aadhaar pay is an Aadhaar based payments interface which allows real time payments to Merchants using Aadhaar number of customers and authenticating them through their biometrics.
6) Cheque Truncation System
Cheque Truncation System (CTS) or Image-based Clearing System (ICS), in India, is a project of the Reserve Bank of India, commenced in 2010, for faster clearing of cheques.
It allows a faster clearing cycle which makes realisation of proceeds of a cheque within the same day possible. It also offers better reconciliation and verification, better customer service and an enhanced customer window.
It reduces manual tasks which leads to a reduction in errors. Real-time tracking and visibility of the cheques, less frauds with secured transfer of images to the RBI are other benefits that banks derive from this solution.
7) Immediate Payment Service
It is an instant payment interbank electronic funds transfer system which is built upon the National Financial Switch network.
Around 200 million IMPS transactions, amounting to roughly US$20 billion of transaction amount, happen every month in India.
8) National Automated Clearing House
A centralised clearing service that aims at providing interbank high volume-low value transactions that are repetitive and periodic in nature.
9) RuPay Contactless
It is a contact-less payment service that allows RuPay Contactless card holders to simply wave their card in front of contactless payment terminals.
It removes the need for inserting or swiping the card at a PoS devices.
10) National Electronic Toll Collection(FASTag)
FASTag is a device that employs Radio Frequency Identification (RFID) technology for making toll payments directly while the vehicle is in motion.
FASTag (RFID Tag) is fixed on the windscreen of the vehicle and enables a customer to make the toll payments directly from the account which is linked to FASTag.
The latest version 2.0 can also be used to buy fuel.
The IDFC First Bank was the first bank to get an approval for FASTag from the Reserve Bank of India.
11) Unified Payment Interface
UPI is a real-time interbank payment system for sending or receiving money. It is integrated with more than 358 banks in India.
Consumers can participate in person to person transfer as long as they both have an account in one of the registered banks.
To initiate fund transfer, users have to use any UPI supporting Android or iOS app, link their bank accounts and generate a UPI PIN. Funds can be transferred via the following methods:
- Virtual Payment Address (VPA): Send or request money between bank accounts mapped using VPA.
- Account number & IFSC: Send money to bank account.
- QR code: Send money by scanning QR code with enclosed VPA or Account number & IFSC.
- Mobile number: Send or request money from/to the bank account mapped using mobile number.
- Aadhaar: Send money to the bank account mapped using Aadhaar number.
Once the fund transfer is initiated, money is debited from payer’s bank account and deposited in the recipient’s bank account in real-time.
The Unified Payment Interface system works 24×7, including weekends and bank holidays.
12) *99# USSD
An USSD channel service for UPI mobile banking launched in November 2012.
Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL) are offering this service.
It uses quick codes for transactions and doesn’t require smartphone and access to internet.
The interface is developed by National Unified USSD Platform (NUUP) to overcome the problem of poor internet connectivity in rural areas with 12 regional languages.
This service is being currently offered by 51 banks. BHIM app also supports USSD features. Understanding the importance of mobile banking in financial inclusion in general and of *99# in particular, various regulatory/trade bodies came together to ensure on boarding of all TSPs on *99# (USSD 1.0) with the wider ecosystem (11 TSPs).
It was launched by Prime Minister Narendra Modi in 2014, as a part of the Pradhan Mantri Jan Dhan Yojana.
13) UPI 123Pay
It a 3-step method to initiate and execute UPI services for feature phone users without the use of internet connection or USSD channel.
It is based on Interactive voice response (IVR) technology which is good specially for rural and urban areas.
It was launched by RBI on 10 March 2022.
14) Digital Payments Score
A Digital Payments Score (DPS) was developed by NPCI with the intention of bolstering the nation’s credit scoring system and fostering increased productivity and expansion.
While determining the criteria, DPS considers things like a person’s financial stability, which includes timely payments, regular bill payments, and whether or not the person regularly transacts for high-value commodities and has the income to support them.
15) Digital Rupee
The Digital Rupee (e₹) or eINR or E-Rupee is a tokenised digital version of the Indian Rupee, issued by the Reserve Bank of India (RBI) as a central bank digital currency (CBDC).
The Digital Rupee was proposed in January 2017 and launched in the 2022-23 financial year to incorporate distributed ledger into Digital Rupee.
Like banknotes it is uniquely identifiable and regulated by the Central Bank. The liabilities for the Digital Rupee lies with the RBI.
Plans include online and offline accessibility. There is Digital Rupee for Wholesale (e₹-W) catering to financial institutions for interbank settlements and Digital Rupee for Retail (e₹-R) for consumer and business transactions.
Conclusion
The National Payments Corporation of India has revolutionised payments in India. It has brought bank transfers and financial transactions to the public’s fingertips, and the fast payment has set India on the fast track to being a developed nation.
With global partnerships already forged, and so many alliances underway, the NPCI is looking at a future where fast, online payment becomes a global norm.
Right from retail to toll payments to cheque clearance, the NPCI has brought all of the country’s financial services under one umbrella, increasing convenience and catering to the world’s largest population out effectively.
Author: Samiksha Deshpande
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