Hello and welcome to exampundit. Since Government is highly promoting the Digital & Cashless Economy, here is a detailed article on all about National Payments Corporation of India or NPCI and its products like UPI, BHIM app, IMPS, *99#. These are important for the Bank Exams as well as Bank Interviews.
National Payments Corporation of India
It is the umbrella organisation for all retail payment systems in India, which aims to allow all Indian citizens to have unrestricted access to e-payment services.
Presently, there are ten core promoter banks (State Bank of India, Punjab National Bank, Canara Bank, Bank of Baroda, Union Bank of India, Bank of India, ICICI Bank, HDFC Bank, Citibank and HSBC). The Board consists of Balachandran.M as the chairman, Nominee from Reserve Bank of India and Nominees from ten core promoter banks. Mr. A. P. Hota, is the managing director and chief executive officer of NPCI.
The corporation service portfolio now and in the future include:
- National Financial Switch (NFS) - network of shared automated teller machines in India.
- Unified Payment Interface (UPI) - Single mobile application for accessing different bank accounts
- BHIM App - Smartphone app built using UPI interface.
- Immediate Payment Service (IMPS) - Real time payment with mobile number.
- *99# - mobile banking using USSD
- National Automated Clearing House (NACH)- a web based solution to facilitate interbank, high volume, electronic transactions
- Cheque Truncation System -online image-based cheque clearing system
- Aadhaar Payments Bridge System (APBS) - Aadhar based payment solution
- RuPay - card scheme
- Bharat Bill Payment System (BBPS) - integrated bill payment system
National Financial Switch
National Financial Switch (NFS) is the largest network of shared automated teller machines (ATMs) in India.
The first ATM in India was set up in 1987 by HSBC in Mumbai. In the following twelve years, about 1500 ATMs were set up in India. In 1997, the Indian Banks' Association (IBA) set up Swadhan, the first network of shared ATMs in India.
The primary headquarters is located at Mumbai.
NFS which is the largest domestic ATM network in the country member banks has been in the fore front in providing inter bank ATM services to maximum customers. Initially, the following basic transactions were available in the NFS network
- Cash Withdrawal
- Balance Enquiry
- PIN Change
- Mini Statement
Unified Payments Interface (UPI)
Unified Payments Interface (UPI) is a system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing & merchant payments into one hood. It also caters to the “Peer to Peer” collect request which can be scheduled and paid as per requirement and convenience.
With the above context in mind, NPCI conducted a pilot launch with 21 member banks. The pilot launch was on 11th April 2016 by Dr. Raghuram G Rajan, Former Governor, RBI at Mumbai. Banks have started to upload their UPI enabled Apps on Google Play store from 25th August, 2016 onwards.
UPI has built on the Immediate Payment Service(IMPS) platform. UPI can be used for multiple common banking tasks.
- Immediate money transfer through mobile device round the clock 24*7 and 365 days.
- Single mobile application for accessing different bank accounts
- Single Click 2 Factor Authentication – Aligned with the Regulatory guidelines, yet provides for a very strong feature of seamless single click payment.
- Virtual address of the customer for Pull & Push provides for incremental security with the customer not required to enter the details such as Card no, Account number; IFSC etc.
Benefits for banks:
- Single click Two Factor authentication
- Universal Application for transaction
- Leveraging existing infrastructure
Benefits for end Customers:
- Round the clock availability
- Single Application for accessing different bank accounts
- Use of Virtual ID is more secure, no credential sharing
Benefits for Merchants:
- Seamless fund collection from customers - single identifiers
- No risk of storing customer’s virtual address like in Cards
- Tap customers not having credit/debit cards
BHIM (Bharat Interface for Money) is a Mobile App developed by National Payments Corporation of India (NPCI), based on the Unified Payment Interface (UPI). It was launched by Narendra Modi, at a Digi Dhan programme at Talkatora Stadium in New Delhi on 30 December 2016. It has been named after Bhim Rao Ambedkar and is intended to facilitate e-payments directly through banks and as part of the 2016 Indian banknote demonetisation and drive towards cashless transactions.
Benefits of BHIM:
- BHIM allow users send or receive money to other UPI payment addresses or scanning QR code or account number with IFSC code or MMID (Mobile Money Identifier) Code to users who do not have a UPI-based bank account.
- BHIM allows users to check current balance in their bank accounts and to choose which bank account to use for conducting transactions, although only one can be active at any time.
- Users can create their own QR code for a fixed amount of money, which is helpful in merchant — seller — buyer transactions.
- They can also have more than one payment address.
One of the innovative payment service launched by NPCI includes *99# service, which works on Unstructured Supplementary Service Data (USSD) channel.
This service was launched envisioning the potential of Mobile Banking and the need for immediate low value remittances which will help in financial deepening and inclusion of underbanked society in the mainstream banking services. *99# service was dedicated to the nation by the Honorable Prime Minister of India Shri Narendra Modi on 28th August 2014 as part of Pradhan Mantri Jan Dhan Yojana (PMJDY).
Features of *99# Service
- Works without Internet – Uses voice connectivity
- Round the clock availability (works even on holidays)
- Accessible through a common code *99# across all TSPs
- Works across all GSM service providers and mobile handsets
- Additional channel for banking and key catalyst for financial inclusion
- Service also offered through BC Micro ATMs to serve the rural populace
Immediate Payment Service (IMPS) is an instant real-time inter-bank electronic funds transfer system of India. IMPS offers an inter-bank electronic fund transfer service through mobile phones. Unlike NEFT and RTGS, the service is available 24/7 throughout the year including bank holidays.
IMPS offers an instant, 24X7, interbank electronic fund transfer service through mobile phones. IMPS is an emphatic tool to transfer money instantly within banks across India through mobile, internet and atm which is not only safe but also economical both in financial and non financial perspectives.
This facility is provided by NPCI through its existing NFS switch.
Objectives of IMPS
- To enable bank customers to use mobile instruments as a channel for accessing their banks accounts and remit funds
- Making payment simpler just with the mobile number of the beneficiary
- To sub-serve the goal of Reserve Bank of India (RBI) in electronification of retail payments
- To facilitate mobile payment systems already introduced in India with the Reserve Bank of India Mobile Payment Guidelines 2008 to be inter-operable across banks and mobile operators in a safe and secured manner
- To build the foundation for a full range of mobile based Banking services.
National Automated Clearing House (NACH)
Started by the National Payments Corporation of India (NPCI), NACH aims to create a better option for facilitating clearing services than the existing Electronic Clearing Service (ECS) system.
NACH is a centralised, web-based clearing service that can ease the work of banks, financial institutions, the government and corporates by consolidating all regional ECS systems into one national payment system, thereby removing any geographical barriers in efficient banking.
The service is now active in all Indian banks with core banking facility. It comes in two variants – ECS Credit and ECS Debit. The significant benefits to bank customers include automatic debits from their account for bill payments (telephone, electricity, etc), loan instalments, insurance premiums and more.
Not only this, NACH is useful for corporate and financial institutions that make payments in bulk like dividends distributions, salaries, interests, pensions, etc.
The process of activation of ECS mandates had a longer turnaround time (30 days) than what it is expected to be in NACH (10 days). Also, the Aadhar-based benefit transfers have been simplified.
There are four types of electronic clearing services:
- Local ECS
- Regional ECS
- National ECS
While the Local ECS, Regional ECS, National ECS are controlled by the Reserve Bank of India or by the designated commercial banks, NACH functions on all India platforms managed by the National Payments Corporation of India (NPCI).
Cheque Truncation System (CTS)
Cheque Truncation System (CTS) or Image-based Clearing System (ICS), in India, is a project of the Reserve Bank of India (RBI), commencing in 2010, for faster clearing of cheques.
CTS is based on a cheque truncation or online image-based cheque clearing system where cheque images and magnetic ink character recognition (MICR) data are captured at the collecting bank branch and transmitted electronically.
The Reserve Bank of India first implemented CTS in National Capital Region, New Delhi from 1 February 2008 with ten pilot banks and the deadline was set as 30 April 2008 for all the banks.
Banks derive multiple benefits through the implementation of CTS, like a faster clearing cycle meaning technically possible realization of proceeds of a cheque within the same day. It offers better reconciliation/ verification, better customer service and enhanced customer window.
Customer satisfaction is enhanced, due to the reduced turn around time (TAT). It also offers better reconciliation and fraud prevention.
Aadhaar Payments Bridge System (APBS)
In order to further speed track Financial Inclusion in the country, Two Working Group were constituted by RBI on MicroATM standards and Central Infrastructure & Connectivity for Aadhaar based financial inclusion transactions with members representing RBI, Unique Identification Authority of India, NPCI, Institute for Development and Research in Banking Technology and some special invitees representing banks and research institutions.
The working group on MicroATM standards & Central Infrastructure & Connectivity has submitted its report to RBI. As a part of the working group it was proposed to conduct a Lab level Proof of concept (PoC), integrating the authentication & encryption standards of UIDAI, to test the efficacy of MicroATM standards and transactions using Aadhaar before they are put to actual use. The PoC was successfully demonstrated at various venues.
AEPS is a bank led model which allows online interoperable financial inclusion transaction at PoS (MicroATM) through the Business correspondent of any bank using the Aadhaar authentication.
- To empower a bank customer to use Aadhaar as his/her identity to access his/ her respective Aadhaar enabled bank account and perform basic banking transactions like balance enquiry, Cash deposit, cash withdrawal, remittances that are intrabank or interbank in nature, through a Business Correspondent.
- To sub-serve the goal of Government of India (GoI) and Reserve Bank of India (RBI) in furthering Financial Inclusion.
- To sub-serve the goal of RBI in electronification of retail payments.
- To enable banks to route the Aadhaar initiated interbank transactions through a central switching and clearing agency.
RuPay is an Indian domestic card scheme conceived and launched by the National Payments Corporation of India (NPCI).
RuPay also provides a unified "Kisan Card", issued by banks across the country under Kisan Credit Card, enabling farmers to transact business on ATMs and PoS terminals.
NPCI has rolled out its chip card for high security transactions using EMV (Europay, MasterCard and Visa) chip technology, which is a global standard for debit and credit cards.
Bharat Bill Payment System
Bharat Bill Payment System (BBPS) is an integrated bill payment system in India offering interoperable and accessible bill payment service to customers through a network of agents, enabling multiple payment modes, and providing instant confirmation of payment.
National Payments Corporation of India (NPCI) will function as the authorized Bharat Bill Payment Central Unit (BBPCU), which will be responsible for setting business standards, rules and procedures for technical and business requirements for all the participants.
The Committee headed by Former RBI Executive Director G. Padmanabhan was set up in 2013 to study the feasibility of implementation of Giro based Payment Systems.