The latest directive from the National Payments Corporation of India (NPCI), clearing the air about charges on bank to bank UPI payments, has spotlighted the organization’s efforts to boost financial inclusion and digital payments in India. The NPCI’s statement that there would be no costs for customers making transactions between bank accounts through UPI and an introduction of a 1.1% interchange charge only on UPI transactions above Rs 2000 made through prepaid payment instruments (PPIs) has brought the focus back on the functions of the organization and its services.
Understanding Prepaid Payment Instruments (PPIs)
According to the Reserve Bank of India, PPIs are facilitative tools for purchasing goods and services, including the transfer of funds, availing financial services, and sending remittances against value stored in or on the instrument. These payment mechanisms come in various forms like payment wallets such as Paytm, Amazon Pay, PhonePe etc., smart cards, mobile wallets, magnetic chips, and vouchers. Banks and Non-Banking Financial Companies (NBFCs) have the license to issue these PPIs. Notably, the NPCI has approved the inclusion of PPI wallets in the interoperable UPI ecosystem.
About National Payments Corporation of India (NPCI)
NPCI, established in 2008 under the guidance of the Reserve Bank of India and Indian Banks’ Association, operates as the overarching organization for all retail payment systems in India. As a not-for-profit entity, it shares its ownership among a consortium of leading banks in the country. Its primary objective is to provide dependable, secure, and efficient retail payment systems, with a larger goal of promoting digital payments and financial inclusion in India.
Products and Services by NPCI
The corporation’s portfolio includes a range of products and services designed to ease the process of financial transactions for the general public. These include Unified Payments Interface (UPI), National Electronic Funds Transfer (NEFT), Immediate Payment Service (IMPS), Bharat Bill Payment System (BBPS), and RuPay card among others.
Past UPSC Civil Services Examination Questions Related to NPCI
In the 2018 UPSC Civil Services Examination, the following question was asked: “Which one of the following links all the ATMs in India?” The options were (a) Indian Banks’ Association (b) National Securities Depository Limited (c) National Payments Corporation of India (d) Reserve Bank of India. The correct answer was (c) National Payments Corporation of India.
The 2017 examination had a question related to NPCI as well: “National Payments Corporation of India (NPCI) helps in promoting financial inclusion in the country. NPCI has launched RuPay, a card payment scheme. Which of the statements given above is/are correct?” The answer options were (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2. The correct answer was (c) Both 1 and 2.