National Payments Corporation of India (NPCI)

• NPCI was set up in 2008. It is a 'Not for Profit' company, which was set up in 2008 as an umbrella organization for all retail payments systems in India. It was set up with the guidance and support of (RBI) and the Indian Banks’ Association (IBA). Initially, the shareholding was for 10 banks, it was diversified to 56 banks.

• Objectives

• • To consolidate and integrate the multiple systems with varying service levels into nation-wide uniform and standard business processes for all retail payment systems.
  • To facilitate an affordable payment mechanism to benefit the common man across the country and help financial inclusion.
• RBI manages and operates NEFT and ECS while other payments are owned and operated by NPCI.

• UPI (Unified Payments Interface): It is a payment system launched by NPCI. It facilitates fund transfer between different bank accounts into a single mobile app. It can transfer money round the clock 24*7 and 365 days. (NEFT & IMPS don't allow transactions 24*7 all year round).

• National Electronics Fund Transfer (NEFT): Even individuals who don't have a bank account can also deposit cash. It is not 24*7.

• Real-Time Gross Settlement (RTGS): It is done on order by order basis (without Netting). Real-Time means the processing of instructions at the time they are received. The minimum amount to be remitted through RTGS is 2 lakhs - infinity.

• (Immediate Payment Service) IMPS: offers an instant, 24*7, interbank electronic fund transfer service through mobile phone. It is introduced in India in 2008.

• USSD (Unstructured Supplementary Service Data): We can do transactions without the Internet through *99#.

• Aadhar Payment Bridge Systems:

  1. It is a payment system implemented by NPCI based on Aadhar numbers issued by UIDAI and IIN (Institution Identification Number) issued by NPCI.
  2. It does not require the Internet and is used to transfer Govt subsidies and benefits in Aadhar Enabled Bank Accounts (AEBA).

• Aadhar Enabled Payment System (AEPS): It is a bank-led model which allows online interoperable financial transactions at PoS/ Micro ATM through BC. It needs internet, unlike Aadhar Payment Bridge.

• BHIM Aadhar Pay

  0. It enables Merchants to receive digital payments from customers over the counter through Aadhar authentication.
  1. Merchant will be eligible to get an incentive of 0.5% of the transaction value with a minimum incentive of Rs. 2 to Rs. 50 per transaction. The maximum transaction limit is Rs. 10000.

• Bharat Bill Payment Systems (BBPS)

  • BBPS is conceptualised by RBI and driven by NPCI.
  • It is 1 stop ecosystem for payment of all bills for the "Anytime Anywhere" bill payment service.

• Electronic Clearing System (ECS): is an alternative method for effecting payment transactions in respect of utility bills like telephone bills, electricity bills etc.

• National Financial Switch (NFS)

  0. NFS is an ATM network having 37 members and is under NPCI.
  1. Till 2009, RBI's Institute for Development and Research in Banking Technology (IDRBT) provided the linkages to ATM networks in India but afterwards, it was taken over by NPCI’s NFS.

• National Electronic Toll Collection (NETC): NPCI has developed the NETC program to meet the electronic toll requirements of the Indian market. It encompasses a common set of processes, business rules and technical specifications.

• National Automated Clearing House (NACH): It is implemented by NPCI for Banks, Financial Institutions, Corporates and Govt a web-based solution to facilitate interbank, high volume, repetitive and periodic transactions.

• On behalf of RBI, NPCI operates Cheque Truncation System (CTS).

Rupay Debit Card

• It is an indigenous domestic debit card introduced in 2014 by NPCI.
• It is an Indian version of Visa or MasterCard. As a part of PMJDY, the Rupay card is distributed and it also provides accidental insurance cover up to Rs. 1 lakh without any charge to the customer (though NPCI pays the premium of Rs. 0.47/ card). To get those benefits, the Rupay debit card must be used at least once in 90 days.

Payment Systems

1. Payment and Settlement Systems (PSS) Act, 2007 provides for the regulation and supervision of payment systems in India and designates RBI for that purpose.
2. Storage of Payment System Data: Entire data relating to payment systems operated by all system providers be stored in a system only in India. RBI is the agency that gave Data Localization guidelines.

3. Trade Receivables Discounting System (TReDS)

   1. It is for facilitating the financing of trade receivables of MSMEs from corporate buyers through multiple financiers is called TReDS.
   2. It includes discounting of both invoices as well as Bills of Exchange.
   3. MSME sellers, Corporate Buyers and Financiers - both banks and Non-banks will be direct participants in TReDS.
   4. It would be governed by the regulatory framework put by RBI under the Payment and Settlement Systems Act, 2007.
   5. Who can participate? Whoever has the Capital of Rs. 100 crores out of which at least 40% must belong to promoters themselves for 5 years. Then it is to be reduced to 30% within 10 years and 26% within 12 years.

Nandan Nilekani Recommendations on Digital Payments

• Removal of transaction charges.
• Merchant Discount Rates (MDR)
• Removal of existing 18% import duty on POS (Point of Sale) machines.
• Reduce the GST on digital transactions
• Put in a place a mechanism to monitor digital payment systems: Digital Financial Inclusion Index
• Reduce the overall cost to the consumers like KYC process
• Protection from fraud and risk (online dispute redressal)
• Set up an Acceptance Development Fund which will be used to develop new merchants in poorly served areas
• Reduce the gap between Digital Credits and Digital Debits
• Additional growth of volume of digital payments by 10 times in 3 years and a shift from high-value low volume high-cost transactions to a low value, high volume low cost transactions.