NPCI—What Is It? How Does It Work?

In this article, we will understand about National Payments Corporation of India (NPCI) in detail.

What is NPCI?

National Payments Corporation of India (NPCI), an initiative of the Reserve Bank of India (RBI) and Indian Banks’ Association (IBA), is an umbrella organisation for operating retail payments and settlement systems in India. NPCI has ten core promoter banks—State Bank of India, Punjab National Bank, Bank of Baroda, Canara Bank, Bank of India, HDFC Bank, Citibank, HSBC, and ICICI Bank.

How does it work?

The organisation functions under the provisions of the Payment and Settlement Systems Act, 2007 in order to create robust payments and settlement infrastructure for India. It is a non-profit organisation set up under the provisions of Section 25 of Companies Act, 1956 (now, Section 8 of Companies Act, 2013). NPCI aims to provide infrastructure to the whole banking industry, both physical and electronic payment and settlements system.

What does the NPCI offer?

NPCI has made its valuable contribution to the banking sector through its products from time to time. The products and their significance are listed below:

• NFS: National Financial Switch (NFS) ATM network with 37 member banks and connecting 50,000 ATMs was taken to NPCI’s authority from the Institute for Development and Research in Banking Technology (IDRBT) on 14 December 2009. After taking over, NFS ATM network has grown many folds. As on 31 July 2019, there were 1,140 members with more than 2.41 lakh ATMs connected to the network.
• IMPS: Immediate Payment Service (IMPS) lets you transfer money in real-time around the clock, 365 days of the year. At the time of introducing IMPS, consumers only had the NEFT and RTGS facilities that were limited to the bank working hours. NPCI conducted a pilot study of the technology with banks such as SBI, BOI, UBI, and ICICI in August 2010. It was publicly launched on 22 November 2010.
• AePS: Aadhaar-enabled Payment Service (AePS) is a result of the attempt to further speed track financial inclusion in the country. AePS is a bank-led model that allows online interoperable financial inclusion transaction at PoS of any bank using the Aadhaar authentication through the retail merchant. A customer must provide details such as bank identification, Aadhaar number, and fingerprint to complete such a transaction.
• CTS: Cheque Truncation System (CTS) facilitates extended cut-off time to accept customer cheques by banks and reduces timelines for clearing. CTS has also eliminated the cost involved in the paper movement. It uses the digital signature/encryption methods to prevent manipulation of data/image during transit.
• RuPay: RuPay is a new card payment system launched to satisfy RBI’s vision to offer a domestic, open-loop, and the multilateral system. This made it easier for Indian banks and financial institutions to implement electronic payments. The term ‘RuPay’ is a combination of Rupee and Payment. NPCI also developed RuPay Contactless payments technology using open standards.
• NACH: National Automated Clearing House (NACH) is a web-based solution that facilitates interbank, high volume electronic transactions that are repetitive in nature. They are well suited for bulk transactions towards the distribution of dividends, interest, subsidies, salary, pension, and more.
• APBS: Aadhaar Payment Bridge (APB) System is used by the government and government agencies to make direct benefit transfers with respect to various Central and state-sponsored schemes.
• *99#: *99# is a USSD-based mobile banking service of NPCI launched in November 2012. Then, the service had limited reach as it was available only with MTNL and BSNL networks. In August 2014, *99# was reintroduced with a wider ecosystem including 11 telephone service providers by the Prime Minister. After the launch of UPI in 2016, the *99# service aimed to take banking services to every common man in the country.
• UPI: Unified Payments Interface (UPI) is a system that makes multiple bank accounts to be accessed from a single mobile application. Users can make instant money transfers through mobile devices round the clock, any day of the year. The technology also features peer-to-peer collect request service with a scheduling facility.
• Bharat BillPay: Bharat BillPay is a system conceptualised by the Reserve Bank of India (RBI) and driven by NPCI. It is a one-stop-shop for all bill payments, such as mutual funds, insurance premiums, school fees, telecom, electricity, DTH, gas, water and more. It provides an interoperable and accessible service to across India. The system is reliable and safe for usage. You can also set up recurring payments on the window. A confirmation of the payment will be sent to you via SMS or receipt.
• NETC: National Electronic Toll Collection (NETC) is a nation-wide programme designed to meet the electronic tolling requirements in India. It is an interoperable toll payment solution that includes clearing house services for settlement and dispute management. NETC uses a common set of processes that enables customers to use FASTag as a payment mode at toll plazas irrespective of who controls the toll plaza.
• BHIM: The introduction of the concept of UPI, an app named Bharat Interface for Money (BHIM) was launched to make payments simpler and easier. Instant bank-to-bank payments can be made using a mobile number or virtual payment address (UPI ID).
• BharatQR: Basically, a QR code is a series of black squares arranged in a square grid that can be read by a camera. NPCI, together with the international card schemes, developed a common standard QR code specification. This led to the creation of Bharat QR (BQR), a person-to-merchant mobile payment solution. When a merchant displays a BQR code, the user can scan the code via BQR-enabled mobile banking app and make the payment using a card-linked account.
• BHIM Aadhaar Pay: This is a payment interface through which you can make real-time payments to merchants using Aadhaar number or VPA of the customer followed by a round of authentication through biometrics. Such a transaction is limited to Rs.10,000 per transaction.