What is NPCI

Learn about how NPCI has improved the online payment scenario in India.
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What is NPCI
5 mins
31 May 2024

The National Payments Corporation of India (NPCI) is a pivotal institution in India's financial landscape. Established in 2008, NPCI has played a vital role in modernising and streamlining the country's payment and settlement systems. It was established by the Reserve Bank of India (RBI) and the Indian Banks' Association (IBA) as an umbrella organisation for retail payment systems in India. With a mission to make payments affordable, accessible, and secure, NPCI has introduced innovative payment solutions to manage financial transactions.

Objectives of NPCI

NPCI was setup with a few core objectives, and they are:

  • To provide healthy and robust payment and settlement systems for in-person and all digital transactions in India.
  • Aims at transforming India into a cashless society by transforming the whole country onto a digital platform.
  • Through various technological advancements NPCI is trying to improve the operational efficiency across all digital payments.

Key functions of NPCI

NPCI plays a multifaceted role in shaping India's digital payments landscape. Its key functions can be summarised as follows:

Design and development of payment systems

NPCI is responsible for designing, developing, and operating payment systems in India. It has introduced several flagship payment systems that have become integral to everyday transactions. These systems facilitate electronic fund transfers, card payments, and digital identity verification.

Interbank settlement systems

NPCI acts as an intermediary between various banks and financial institutions to facilitate the settlement of interbank transactions. This ensures the smooth transfer of funds between different entities, contributing to the efficiency of the financial ecosystem.

Unified Payment Interface (UPI)

One of NPCI's most groundbreaking achievements is the Unified Payment Interface (UPI). UPI is a real-time payment system that allows users to send and receive money directly from their bank accounts using a mobile phone. It has revolutionised peer-to-peer and merchant transactions, making payments simple and convenient.

Immediate Payment Service (IMPS)

IMPS is another NPCI initiative that enables instant fund transfers between banks 24/7. It has proven to be a valuable service, especially in emergencies when quick money transfers are crucial.

Aadhaar-enabled payment systems

NPCI has integrated Aadhaar, the unique identification system, into its payment systems, enabling easy and secure verification of identities during transactions. This feature has been pivotal in expanding financial inclusion in India.

National Financial Switch (NFS)

NFS is a flagship product of NPCI that connects ATMs and helps streamline transactions across different banks. It has improved the efficiency and accessibility of ATM services in India.

Popular NPCI payment systems

NPCI has introduced a range of payment systems that have gained immense popularity in India. Some of the most well-known ones include:

  1. UPI (Unified Payment Interface)
    UPI allows users to link their bank accounts to a mobile application, transfer money seamlessly, pay bills, and make online purchases. With over a billion monthly transactions, it has become a preferred choice for digital payments.
  2. BHIM (Bharat Interface for Money)
    BHIM is an app developed by NPCI that simplifies UPI-based transactions. It provides an intuitive interface for users to send or receive money instantly.
  3. RuPay
    RuPay is India's domestic card payment network, which offers a range of debit and credit cards. It competes with international card networks like Visa and Mastercard and is widely accepted nationwide.
  4. AePS (Aadhaar Enabled Payment System)
    AePS leverages Aadhaar for biometric verification, enabling individuals to make financial transactions securely without needing physical cards or PINs.
  5. NACH (National Automated Clearing House)
    NACH is an electronic clearing service that automates repetitive financial transactions like salary disbursements, loan EMI collections, and more, making them more efficient and secure.

Which banks come under NPCI?

NPCI collaborates with a vast network of banks in India, encompassing both public-sector and private-sector banks. Some prominent banks in the NPCI ecosystem include the State Bank of India, HDFC Bank, ICICI Bank, Punjab National Bank, Axis Bank, and many others. Almost all major banks in India are affiliated with NPCI, enabling seamless interoperability between their customers.

How do I check my Aadhaar-NPCI link status?

Verifying the status of your Aadhaar-NPCI linkage is essential to ensure the security and reliability of your digital transactions. Here is how you can check it:

  1. Visit the official NPCI Aadhaar status checking portal
  2. Enter your Aadhaar number
  3. Enter your registered mobile number to generate an OTP
  4. Enter the OTP sent to your registered mobile number
  5. Check the status of your Aadhaar integration with the NPCI

This process ensures that your Aadhaar is correctly linked with your bank account and other financial services offered through NPCI.

How to use NPCI services?

Using NPCI's payment systems is straightforward and user-friendly. Here is a step-by-step guide on how to use UPI, one of NPCI's most popular services:

  1. Start by downloading a UPI-enabled mobile app like the Bajaj Finserv app or your bank application.
  2. Open the app and select your bank. You will need to link your bank account to the UPI app by providing the necessary details.
  3. Set up a unique VPA, which acts as your UPI ID (for example, yourname@bankname).
  4. Create a secure PIN to authorise transactions.
  5. To send money, enter the recipient's VPA or mobile number, the amount, and a short description (optional). Confirm the transaction by entering your UPI PIN.
  6. To receive money, share your VPA with the sender. Confirm the incoming transaction notification on your UPI app.
  7. UPI also allows you to pay bills, recharge mobile phones, and shop online, among other things.

Conclusion

NPCI's payment systems are designed to focus on security and convenience, making it accessible to individuals from all walks of life. Its innovative payment systems, including UPI and BHIM, have empowered millions of Indians to embrace digital transactions. As NPCI continues to evolve and introduce new payment solutions, it is pivotal in advancing India's journey towards a cashless economy. Whether you are a customer of a public or private sector bank in India, you will benefit from NPCI's services and contribute to the nation's digital financial revolution.

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Disclaimer

1. Bajaj Finance Limited (“BFL”) is a Non-Banking Finance Company (NBFC) and Prepaid Payment Instrument Issuer offering financial services viz., loans, deposits, Bajaj Pay Wallet, Bajaj Pay UPI, bill payments and third-party wealth management products. The details mentioned in the respective product/ service document shall prevail in case of any inconsistency with respect to the information referring to BFL products and services on this page.

2. All other information, such as, the images, facts, statistics etc. (“information”) that are in addition to the details mentioned in the BFL’s product/ service document and which are being displayed on this page only depicts the summary of the information sourced from the public domain. The said information is neither owned by BFL nor it is to the exclusive knowledge of BFL. There may be inadvertent inaccuracies or typographical errors or delays in updating the said information. Hence, users are advised to independently exercise diligence by verifying complete information, including by consulting experts, if any. Users shall be the sole owner of the decision taken, if any, about suitability of the same.

Frequently asked questions

When was NPCI introduced?

NPCI was established in the year 2008 as a non-profit organisation to regulate retail payments and settlements in India.

Can NPCI audit the UPI participants?

Yes, NPCI can directly or through a third-party audit the UPI participants and may request for their data, information and transaction records anytime.

How can I link my bank account to NPCI?

To link bank account to NPCI the customer needs to directly visit the bank home branch and submit a consent form (Annexure 1). Upon receiving the consent form the bank should seed the Aadhar number in NPCI database.

What is NPCI limit?

The transaction limit per day is Rs. 1 lakh for one bank account.

How does NPCI earn money?

NPCI earns one-third of its revenue from interchange fees, switching fees, and other charges.

What is the role and responsibilities of NPCI?

Roles and responsibilities of NPCI:

  1. NPCI prescribes rules, regulations, guidelines, and the respective roles, responsibilities, and liabilities of the PSPs and TPAP, with respect to UPI. This also includes transaction processing and settlement, dispute management and clearing cut-offs for settlement.
  2. NPCI approves the participation of Customer Banks, PSP, Third Party Application Providers (TPAP) and Prepaid Payment Instrument issuers (PPIs) in UPI.
  3. NPCI provides a safe, secure, and efficient UPI system and network.
  4. NPCI provides online transaction routing, processing and settlement services to members participating in UPI. NPCI can, either directly or through a third party, conduct an audit on UPI participants and call for data, information and records related to their participation in UPI.
  5. NPCI provides the PSP access to the system where they can download reports, raise chargebacks, update the status of UPI payment transactions, etc.
​How to link NPCI to bank account?

You do not directly link to NPCI. It is an organization that facilitates bank transfers. You link your Aadhaar card to your bank account.

​​How do I check my NPCI bank linking status?
  • Visit your bank's website or app
  • Look for sections on Aadhaar linking or account details
  • You can find the status there
​​What is NPCI in a bank account?

NPCI acts behind the scenes. When your Aadhaar is linked, it allows features like UPI transfers to work seamlessly between banks.

​​How to map Aadhaar with bank account?
  • Visit your bank branch or their website/app.
  • Look for Aadhaar seeding or linking options.
  • Provide your Aadhaar details and complete verification.
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