National Payments Corporation of India (NPCI): Evolution, Initiative & Structure

Introduction 

National Payments Corporation of India (NPCI), an umbrella organisation for operating retail payments and settlement systems in India, is an initiative of the Reserve Bank of India (RBI) and the Indian Banks’ Association (IBA) under the provisions of the Payment and Settlement Systems Act, 2007, for creating a robust Payment & Settlement Infrastructure in India.

Incorporation and Shareholding Structure of National Payments Corporation of India (NPCI)

• It has been incorporated as a “Not for Profit” Company under the provisions of Section 25 of the Companies Act 1956 (now Section 8 of the Companies Act 2013).
• Objective
  • To provide infrastructure to the entire Banking system in India for physical as well as electronic payment and settlement systems. 
  • The Company is focused on bringing innovations in the retail payment systems through the use of technology to achieve greater efficiency in operations and widening the reach of payment systems.
• Core Promoter Banks of National Payments Corporation of India (NPCI): 
  • The ten core promoter banks are State Bank of India, Punjab National Bank, Canara Bank, Bank of Baroda, Union Bank of India, Bank of India, ICICI Bank Limited, HDFC Bank Limited, Citibank N. A. and HSBC. 
  • In 2016 the shareholding was broad-based to 56 member banks to include more banks representing all sectors. 
• Expansion of Shareholding to Include New Entities in National Payments Corporation of India (NPCI): 
  • New entities regulated by RBI were inducted, consisting of Payment Service Operators, payment banks, Small Finance Banks, etc. in 2020.
  • The shares were allotted under the issuance of equity shares on a private placement basis.

National Payments Corporation of India (NPCI) Operated Payment System

• National Payments Corporation of India (NPCI), during its journey, has made a significant impact on the retail payment systems in the country.

• Dedicated to the nation by former President Shri Pranab Mukherjee, and later made the card of choice for the ambitious Pradhan Mantri Jan Dhan Yojana, RuPay is now a known name.

• • Rupay: 
    • It is an indigenously developed Payment System.
    • It supports the issuance of debit, credit and prepaid cards by banks in India.

• Enhanced Payment Capabilities:

• • • • All RuPay Cards will now have the functionality of NCMC which can enable low-value contactless payments (like transit, toll, parking, retail) using Offline technology.
      • The alliances with international network partners (Discover Financial Services, Japan Credit Bureau and China Union Pay) provide valuable access to global acceptance footprint and offer world-class payment solutions to RuPay cardholders.
  • UPI
    • Launch was on 11th April 2016.
    • Unified Payments Interface (UPI) has been termed as the revolutionary product in the payment system.
    • UPI integrates multiple bank accounts into a single mobile app, combining various banking features, effortless fund transfers, and merchant payments
    • Immediate money transfer, 24*7 and 365 days Services.
    • Single mobile application for accessing different bank accounts.
    • Virtual address of the customer.
    • Single Click 2 Factor Authentication.
  • BHIM (Bharat Interface for Money): 
    • Launched in December 2016.
    • It is based on the Unified Payment Interface (UPI) to facilitate e-payments directly through banks. 
    • It is interoperable with other UPI applications and bank accounts. 
    • One can also request money through the app from a UPI ID.

• Aadhaar Payment Bridge (APB) System:

• • This System helps the Government and Government agencies in making Direct Benefit Transfers for various Central as well as State sponsored schemes.
• Aadhaar Enabled Payment System (AePS): 
  • It has become instrumental in increasing the accessibility of basic banking services in underserved areas. 
  • Allows people to carry out financial transactions on a Micro-ATM by furnishing just their Aadhaar number and verifying it with the help of their fingerprint/iris scan.
  • To extend the convenience of biometrics to merchant payments, BHIM Aadhaar has been launched
• National Electronic Toll Collection (NETC): 
  • Helps in electronic toll collection at toll plazas using FASTag.
  • FASTag is an RFID passive tag used for making toll payments directly from the customers linked prepaid or savings/current account.
  • It allows drivers to make toll payments when the vehicle is in motion without stopping at the toll plazas by saving Fuel and Time.
• National Automated Clearing House (NACH): 
  • Service offered by National Payments Corporation of India (NPCI) to banks that aims at facilitating interbank high volume, low-value debit/ credit transactions, which are repetitive and electronic.
  • It provides for both account-based and Aadhaar-based transactions.
• Immediate Payment Service (IMPS): It offers an instant 247׳ interbank electronic fund transfer service through mobile phones.
  • Can be done from branches, net banking, and mobile banking platforms.
  • 24/7: Can make IMPS transactions service 24/7  (even on public or bank holidays).
  • Frequency and Limit: Can use the IMPS facility as much as you want in a day, but the only limit is you can send up to Rs. 5 lakh per day.
  • Charges: can be between Rs. 2.5 to Rs. 25 with additional GST charges.
  • Transactions are instantly settled once your bank approves the payment, sometimes, it can take up to 5 working days if your payment is stuck due to server problems.
  • Once an IMPS is initiated, there is no option to stop it in the middle.
• Bharat Bill Payment System (BBPS): Function as entities facilitating collection of repetitive payments with 200+ Billers in the categories such as, electricity, water, gas, telephone and Direct-toHome (DTH).
• NFS (National Financial Switch (NFS): 
  • It is the largest network of shared Automated Teller Machines (ATMs) in India facilitating interoperable cash withdrawal, card-to-card funds transfer and interoperable cash deposit transactions among other value-added services in the country.

Conclusion

• With these products the aim is to transform India into a less-cash society by touching every Indian with one or other payment services. 
• With each passing year we are moving towards our vision to be the best payments network globally.
• Through its various products and initiatives, such as RuPay, UPI, and IMPS, National Payments Corporation of India (NPCI) has facilitated secure, efficient, and inclusive electronic payment systems, contributing significantly to the country’s financial inclusion and digital transformation goals.