What is Payment System?

Payment System is Financial system supporting transfer of funds from payers to

payee, usually through exchange of debits and credits among financial institutions. It
consists of a paper-based mechanism for handling checks and drafts, and a paperless
mechanism (such as electronics funds transfer) for handling electronic commerce
transactions.

Reserve Bank of India(RBI) continues to evolve new payment methods and slowly
revamping the payments and settlement capability in India.

Payment Systems in India: Cheques, ECS, NEFT, RTGS

Use of paper-based instruments (like cheques, drafts, and the like) accounts for nearly
60% of the volume of total non-cash transactions in the country. Electronic mode of
Payment is gaining popularity due to the concerted efforts of Reserve Bank of India to
popularize the electronic payment products in preference to cash and cheques.

Paper Mode: Reserve Bank had introduced Magnetic Ink Character Recognition
(MICR) technology for speeding up and bringing in efficiency in processing of
cheques. Recent developments in paper-based instruments include launch of Speed
Clearing (for local clearance of outstation cheques drawn on core-banking enabled
branches of banks), introduction of cheque truncation system (to restrict physical
movement of cheques and enable use of images for payment processing), framing
CTS-2010 Standards (for enhancing the security features on cheque forms) and the
like.

Electronic Clearing Service (ECS) Credit: ECS (Credit) scheme was introduced
during the 1990s to handle bulk and repetitive payment requirements (like salary,
interest, dividend payments) of corporates and other institutions. ECS (Credit)
facilitates customer accounts to be credited on the specified value date and is
presently available at all major cities in the country.

The ECS (Debit) Scheme was introduced by RBI to provide a faster method of
effecting periodic and repetitive collections of utility companies. ECS (Debit)
facilitates consumers / subscribers of utility companies to make routine and repetitive
payments by mandating bank branches to debit their accounts and pass on the
money to the companies. This tremendously minimizes use of paper instruments
apart from improving process efficiency and customer satisfaction. There is no limit
as to the minimum or maximum amount of payment. This is also available across
 major cities in the country.

National Electronic Funds Transfer (NEFT) System: Introduced in November

2005 for facilitating one-to-one funds transfer requirements of individuals /
corporates. NEFT system provides for batch settlements at hourly intervals.
Real Time Gross Settlement (RTGS) System RTGS is a funds transfer systems
where transfer of money takes place from one bank to another on a real time and
on gross basis. Gross settlement means the transaction is settled on one to one
basis without bunching or netting with any other transaction. Once processed,
payments are final and irrevocable. This was introduced in in 2004 and settles all
inter-bank payments and customer transactions above INR 2 lakh.

Clearing Corporation of India Limited (CCIL): CCIL was set up in April 2001 by
banks, financial institutions and primary dealers, to function as an industry service
organization for clearing and settlement of trades in money market, government
securities and foreign exchange markets.

Other Payment Systems Are Pre-Paid Payment Systems, ATMs / Point of Sale (POS)
Terminals / Online Transactions, Mobile Banking.

Aadhaar Enabled Payment System(AEPS), connects the banks with the unbanked
and the under-banked. The AEPS system leverages Aadhaar online authentication and
enables Aadhaar Enabled Bank Accounts (AEBA) to be operated in anytime-anywhere
banking mode through Micro ATMs. This system is controlled by the National
Payments Corporation of India (NPCI). The 5 Aadhaar enabled basic types of banking
transactions are: Cash Withdrawal, Cash Deposit, Aadhaar to Aadhaar Funds Transfer,
Gateway Authentication Service.

How have Payment Systems evolved over time?

Evolution of Payment Systems over time from Barter

Who regulates the Payment and Settlement Systems in India?

In India, the payment and settlement systems are regulated by the Payment and
Settlement Systems Act, 2007 (PSS Act) which was legislated in December 2007. The PSS
Act as well as the Payment and Settlement System Regulations, 2008 framed thereunder
came into effect from August 12, 2008. In terms of Section 4 of the PSS Act, no person
other than the Reserve Bank of India (RBI) can commence or operate a payment system
in India unless authorized by RBI. Reserve Bank has since authorized payment system
operators of pre-paid payment instruments, card schemes, cross-border in-bound money
transfers, Automated Teller Machine (ATM) networks and centralized clearing
arrangements

What is National Payments Corporation of India?

The Reserve Bank encouraged the setting up of National Payments Corporation of India
(NPCI) to act as an umbrella organization for operating various Retail Payment Systems
(RPS) in India. NPCI became functional in early 2009

Products and Services

Aadhaar Payment Bridge System(APBS)

Bharat Bill Payment System(BBPS)
National Financial switch
Immediate payment service(IMPS)
Rupay
National Automated Clearing House
Cheque truncation system
Aadhaar enabled payment system(AEPS)

Aadhaar Payment Bridge System(APBS)

a. It consists of an aadhaar number, which is a financial address of a person.

b. It serves the goal of financial inclusion and in electrification of retail payments
c. Beneficiary seeds his aadhaar number in the scheme database maintained by
government
d. Beneficiary seeds his aadhaar number with his bank a/c
e. Respective bank seeds the a/c holder aadhaar number in NPCI Mapper
f. Customer gives aadhaar request in his bank branch
g. Bank seeds the aadhaar number in CBS(core banking system)
h. Banks IT team fetches the aadhaar number seeded in CBS and prepares the Mapper file
to upload it into NPCI mapper(National payment corporation of India)
Aadhaar number is stored in mapper along with customers banks IIN(institutional
identification number)

Settlement agent is RBI and if not RBI, then bank can participate with the sponsor bank
which has settlement a/c with RBI.

Bharat Bill Payment System(BBPS)

It is an integrated online platform which is being developed by the National Payments

Corporation of India for all kinds of bill payments. The platform intends to build an
interoperable service through a network of agents, enabling multiple payment modes along
with instant generation of receipts of payments. It would connect the utility service
companies on one end and all payments service providers on the other.

Benefits of BBPS

1. BBPS will offer the facility of Anytime Anywhere payment of bills, participating on
BBPS network, to customers through a network of agents.
2. It is expected to provide an accessible bill payment system to the large segments of
un-banked and under-banked population.
3. Consumers can pay the bills of any biller at a single point and facilitate payments via
multiple modes i.e. Cash, Debit Cards, Credit Cards, Prepaid payment instruments
including wallets and other electronic payment options such as Net banking, IMPS,
NEFT, etc. This is also known as interoperability.
4. The BBPS outlets could include bank branches, business correspondents, Customer
Service Points, retail agents of aggregators, ATMs (Automated Teller Machine),
Kiosks, etc. Any customer will be able to pay bills of the billers enrolled in the BBPS
system at any BBPS outlet.
5. Furnishes instant confirmation of payment made via a payment receipt/confirmation
message. The receipt could be in the form of SMS/ email/ print out as desired by the
customer
6. The BBPS brand will assure trust and confidence amongst consumers for the
certainty, reliability and safety of the transaction

BBP (Bharat Bill Payment) SYSTEM PARTICIPANTS

1. Bharat Bill Payment Central Unit (BBPCU)

Will be the single authorized entity operating the BBPS. The BBPCU will set necessary
operational, technical and business standards for the entire system and its participants,
and also undertake clearing and settlement activities. The National Payments Corporation
of India (NPCI) will be authorised as the BBPCU to implement the BBPS.
2. Bharat Bill Payment Operating Units (BBPOUs)

They will be authorised by RBI as operational units to function in adherence to the

standards set by the BBPCU. While there will be a single BBPCU, there could be multiple
BBPOUs operating under the BBPS. BBPOUs will on-board billers, aggregators, payment
gateways, set up agent network and customer touch points to handle bill payments through
different delivery channels, including self-service, assisted, electronic and manual modes.
BBPOUs may be banking as well as non-bank entities.

3. Billers
Billers are the service provider who collect payments from customers/ consumers and will
participate in the BBPS through BBPOU. The category of billers participating in BBPS will be
specified from time to time.

4. Agent Institutions
BBPOU will on-board Agent institutions which may further on-board agents and/ or set up
customer service points in various regions and locations.

5. Agents
Agents will be the customer touch points and service points which will be available in the
form of branch offices, collection centres and outlets. Agents will accept bill payments
through various modes. Agents may be on-boarded either directly by BBPOU or by Agent
Institutions to offer BBPS services. Agents on-boarded by Agent Institutions are also
referred to as Sub-agents.

6. Sponsor Bank
In case of ON-US transactions(the biller and payment collecting agent belong to same
BBPOU), the BBPOUs will identify a settlement bank where the agents and the billers need
to maintain their settlement accounts and the BBPOU will arrange to settle the amounts to
the billers and agent institutions / agents through the settlement bank and designated
settlement accounts. In case of OFF-US transactions(the biller and payment collecting
agent belong to different BBPOUs), since the clearing and settlement to BBPOUs will be
done by the BBPCU, the BBPOUs will have to indicate a designated settlement bank
account through which the OFF-US settlement transactions will be processed by the BBPCU.
In case of a non-bank BBPOU, the designated settlement account will be of its sponsor
bank.

ROLES AND RESPONSIBILITIES

1. BBPCU
1.1. BBPCU will be responsible for setting standards

a) Business standards, rules and processes for on-boarding the BBPOUs authorized under
the PSS Act; including multiple billers and BBPOUs relationship.

b) Processes and procedures for various business/technical/operational requirements both

at the BBPCU and the BBPOUs level, including setting up of agent network.

c) Information exchange standards, including security standards.

d) Risk mitigation.

1.2. BBPCU would be responsible for marketing and brand positioning of the pan-India
BBPS, the oversight and certification for conduct of operations of the BBPOUs.

1.3. BBPCU will be responsible for setting standards in relation to payment, clearing and
settlement of the transactions carried out at various BBPOUs and their agents - both ON-US
and OFF-US transactions.

1.4. BBPCU will handle the process of clearing and net settlement between different
BBPOUs for all OFF-US
transactions in accordance with the standards and SLAs set for the purpose.

1.5. BBPCU will put in place a dispute resolution mechanism to handle disputes arising
between system participants.

1.6. BBPCU will ensure the setting up of a suitable fraud and risk management framework
for the BBPS.

1.7. BBPCU will ensure an appropriate MIS system is put in place.

1.8. BBPCU will put in place a centralized end-to-end complaints management system in
conjunction with BBPOUs for all ON-US and OFF-US transactions.

2. BBPOU

2.1. On-boarding of billers as per defined standards/ rules, appointment of agents, carrying
out due diligence (as per processes and rules set out for appointment of agents) and
ensuring confidentiality and privacy standards are in place.

a) Billers

Carrying out due diligence on a new biller before it is on-boarded.

Biller configuration and selection of respective BBPOUs for routing.
Biller agreement should ensure that they adhere to SLAs, standards (as applicable),
turnaround time for customer grievance redressal as prescribed by BBPCU.

b) Agents

Carrying out due diligence, verification and scrutiny of agents.

Educating agents about BBPS.
 Ensuring that agents adhere to SLAs, standards, turnaround time, transparency
standards as prescribed by BBPCU.
Educating agents about customer handling & grievance handling.

2.2. Infrastructure development - Application development, including APIs where required,

by respective BBPOUs in adherence to standards set by the BBPCU.

2.3. Ensuring availability of the required infrastructure, system, hardware, software,

network, scanners and other devices at the central site and all outlets as required to
comply with BBPS guidelines.

2.4. Transaction handling - Safety and security of transactions, verification of biller

information, and adherence to transaction flow standards / rules set by the BBPCU.

2.5. The BBPOUs shall arrange to disclose all important terms and conditions in clear and
simple language (preferably in English, Hindi and the local language) comprehensible to
the customers of various billers/users of its services. These disclosures should include:

a) All charges and fees associated with the use of bill payment facility, and

b) Details regarding Complaints and grievance redressal mechanism and modalities

including telephone numbers and website address.

2.6. BBPOUs will handle end-to-end and directly settle all ON-US (and OFF-US through
BBPCU) transactions as per commercial arrangements with the billers and agent
institutions/ agents in adherence to the standards set for this purpose by the BBPCU.

2.7. Handling customer grievances and disputes as per set procedures and standards for
billers/ agents/end-customers through the centralized end-to-end complaint management
system in conjunction with BBPCU for all ON-US and OFF-US transactions.

2.8. Value-added services provide MIS and Reporting and other services to the billers/
aggregators/ agent institutes/agents.

2.9. Compliance with Service Level Agreements to provide various services and resolution
of grievances as per SLAs and TAT prescribed by BBPCU.

2.10. Ensuring that the Agent Institutions, Agents and sub-agents (together called agency
network) comply with BBPS standards, procedural guidelines and inter-operability standards
and carrying out internal audits to confirm compliance by the agency network.
Interoperability will be mandatory.

2.11. Meeting obligations as may be prescribed to provide an accessible bill payment

system to the large segments of un-banked/ under-banked population.

2.12. BBPOU cannot have bilateral arrangements with another BBPOU nor with any biller
for aggregation of bill payments outside the BBPS.

2.13. BBPOU shall not use, nor allow agent institutions and agents to use customer data
collected in the course of bill payment or registration for other purposes without the
consent of the customer. Suitable opt-out option will be provided to customers in all such
cases.

3. Billers

3.1. Compliance of BBPS Procedural Guidelines /DMS Guidelines and standards as

applicable to the BBPS participants in general and billers in particular.

3.2. Billers in consultation with their default BBPOUs shall ensure compliance with the BBPS
standards and guidelines for being on-boarded, inter-operability of bill payments, SLAs,
settlement standards and guidelines and standards for resolution of customer complaints,
grievances and disputes.

3.3. Billers shall enter into agreements with BBPOUs on the lines of standards prescribed by
BBPCU.

4. Agent Institutions and Agents

Entities acting as Agent Institutions or Agents on-boarded by BBPOUs and Sub-agents

appointed by Agent Institutions shall have the following roles and responsibilities:

4.1. They shall provide the customer touch points where payment of bills issued by any
biller who is a participant in the BBPS will be accepted.

4.2. They will facilitate BBPS registration by customers who opt to do so and also assist the
registered customers to map billers to their registered id, as desired by the customer.

4.3. Availability of the required hardware, software, system, printers, scanners and other
devices, connectivity, etc. as required to carry out business of bill payments under BBPS.

4.4. The agent outlets shall make available a number of modes for making payment of bills.

4.5. All procedural guidelines and standards of BBPS shall be adhered to.

4.6. Customer should be made aware about extra service charges / fees, if any, which
customer may have to pay for bill payments. Such charges shall not exceed the maximum
amount prescribed by BBPCU or BBPOU. Information about the charges, if any, payable by
the customer shall be prominently displayed in the premises/website/location.

4.7. Customer should be made aware about actual realization/ settlement cycle for the bills
to be paid.

4.8. The customer shall be given an instant confirmation of bill payments in accordance
with the standards and procedural guidelines of BBPS.

4.9. A BBPS logo or trademark will be prominently displayed at the collection points as per
the guidelines laid down by BBPCU to identify agents outlet as BBPS enabled Service Point.

4.10. All-important terms and conditions shall be displayed in clear and simple language
(preferably in English, Hindi and the local language) comprehensible to the customers of
various billers/users of the services offered by the agent.

These disclosures will include:

a) All charges and fees associated with the use of bill payment facility, and

b) The customer service telephone numbers and website URL

c) Details regarding complaints and grievance redressal mechanism and modalities

including telephone numbers and website address.

4.11. It shall be ensured that confidentiality and privacy standards are complied with
diligently. Non-compliance will invite stiff penalties. Customers data collected in the course
of bill payment or customer registration will not be used for other purposes without the
consent of the customer or outside the framework prescribed by its BBPOU. Suitable opt-
out option will be provided to customers in all such cases.

4.12. It will be Agents responsibility to verify the accuracy of the data captured from the
customer to ensure correct application of the payment.

4.13. Agents will sensitively handle the customer in case of any dispute and grievance/s.

4.14. If a customer wishes to lodge a complaint against any biller or about bill payment
made by him anywhere in the BBPS, he may do so at any agent/ BBPS outlet. The customer
shall not be levied any charges for lodging a complaint in the BBPS. Heavy penalties may
be levied on BBPOUs/Agents who deviate from the operating guidelines.

4.15. Agent may be terminated by BBPOU at the instance of BBPCU if customer dispute
percentage exceeds certain defined threshold limit as fixed by BBPCU from time to time.
Terminated agents cannot become agent of any other BBPOU till BBPCU is satisfied with
corrective actions put in place by the agent

5. Sponsor Bank

5.1. The Sponsor bank will inform BBPCU regarding their sponsorship of their respective
BBPOU.

5.2. A sponsor bank of a Non-bank BBPOU shall be responsible for the settlement of OFF-US
transactions of the respective BBPOU, to be done in the books of RBI by the BBPCU.

5.3. A sponsor bank of a Non-bank BBPOU may act as settlement bank for settlement of
ON-US transactions of the respective BBPOU.

5.4. It will be the responsibility of the Sponsor bank to execute all required arrangements
and authorizations, including Settlement Guarantee Fund participation, to ensure orderly
and smooth settlement of OFF-US transactions.

5.5. Sponsor bank and BBPOU will have a formal agreement in accordance with the terms
and conditions agreed between them.

5.6. A Sponsor bank can sponsor one or more BBPOU.

5.7. In case of change in sponsor bank BBPOU will inform BBPCU and will enter into a
tripartite agreement with new sponsor bank.

BILL PAYMENT OPTION

The BBPS will have two options for bill payments:

1. Quick Pay option,

2. Bill payment for a registered customer in BBPS.

a. Quick Pay

Under Quick Pay option for bill payment, only the bill parameters would be used to validate
the bill details and fetch the required information for accepting payment of the bill. To avail
Quick Pay option, a customer will visit any BBPS enabled agent outlet/ service points
(hereinafter referred to as BBPS outlet) or a BBPS enabled website for payment of bill and
enter his bill information, based on which the agent/website will verify the details and enter
the bill amount. It is expected that the bill information given by the customers will be
validated and certain minimum information about the bill would be made available to the
customer to ensure that the payment is correctly applied. The customer will simply pay
his/her bill. For some billers it would be possible to pay bills without validating bill
information, based on certain required minimum biller specific information.

Note: Both the scenarios of Bill fetch and ad-hoc-payment will be accepted.

b. Registered Customer

The facility of registering a customer under BBPS is purely optional. BBPS will offer to the
customers an option of registration in the BBPS system and the repository of registered
customer database will be maintained at BBPCU level. This will facilitate payment of
various bills by the registered customer. Registration will also enable offering of many
value-added services to the registered customers. Customers desirous of registering
themselves in the BBPS system may approach any BBPS outlet or a BBPS-enabled website.
Registration will be a one-time process, a unique customer ID will be generated and the
registration details of the customer will be available to all BBPOUs, irrespective of where
the registration was done. Agents/Registered customers can add billers and necessary
parameters for the bills at any BBPS outlet or a BBPS-enabled website. As the registration
particulars and details of billers mapped to a registered customer will be available to all
BBPOUs, a full set of such data will have to be maintained by BBPCU.

The procedure to register a customer in the BBPS will be as follows:

Step-1: Following illustrative details of the customer will be required for registration in
BBPS system.

1. Full Name of the Customer

2. Customer Mobile No

3. An acceptable ID number (e.g., PAN, Aadhaar, Bank Account, Voter ID Card, etc. but
optional)

4. Address

5. Email ID
Step-2: Once all details of the customer are submitted, as a part of verification customer
will get a one-time password on his/ her given mobile number/e-mail. Customer will enter
the one time password at the BBPS outlet/website for completing the customer registration.

Step-3: A BBPS Customer ID will be generated and sent to the customer mobile no. and/ or
email. For the sake of customer convenience, customer mobile number or email ID may be
used as an alternate identifier to fetch the BBPS customer ID for all future transactions.

Step-4: Customer registered in BBPS can have billers and bills pertaining to them mapped
to their BBPS ID. The mapping may be done at any BBPS outlet of any BBPOU or a BBPS-
enabled website. Particulars of the billers mapped to a registered customer will be available
to all BBPOUs. A registered customer may visit any BBPS outlet or BBPS enabled website
and pay the bills of all billers mapped to the customer ID.
NATIONAL FINANCIAL SWITCH

National Financial Switch (NFS) is the largest network of shared automated teller
machines (ATMs) in India. It was designed, developed and deployed by the Institute for
Development and Research in Banking Technology (IDRBT) in 2004, with the goal of inter-
connecting the ATMs in the country and facilitating convenience banking for the average
Indian.

It is run by the National Payments Corporation of India (NPCI).

The National Financial Switch was launched by the IDRBT on 27 August 2004, connecting
the ATMs of three banks, Corporation Bank, Bank of Baroda and ICICI Bank. The IDRBT then
worked towards bringing all major banks in India on board and by December 2009, the
network had grown to connect 49,880 ATMs of 37 banks, thereby emerging as the largest
network of shared ATMs in the country.

The Reserve Bank of India granted authorisation to NPCI to take over the operations of
National Financial Switch (NFS) from the Institute of Development and Research in Banking
Technology (IDRBT) on a as is where is basis on 15 October 2009.

Any bank that provides core banking services with 24x7 transaction banking capabilities
with or without ATMs may join the National Financial Switch through a sponsor bank. This
allows non-scheduled Urban Co-operative Banks (UCBs) and Regional Rural Banks (RRBs) to
gain access to the national network of over 103,000 ATMs in the country.

As of May 2014, the NFS Network connects 1,88,600 ATMs of 90 Direct Member banks, 228
Sub-Member banks, 52 RRB member banks and 7 white-label ATM providers, which is the
largest number of ATMs under a single network in India.

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

To enable the member banks of NFS to offer greater utility to their customers, NPCI has
introduced the below mentioned functionalities as value added services to enable
customers to use these services at any participating bank ATMs.

Card to Card Fund transfer (ATM/Debit Card to ATM/Debit Card): Using this service, a Card
holder of a participating NFS Member Bank will be able to remit funds to another Card
holder of a participating NFS Member Bank. The funds will be transferred basis the
Beneficiarys Card Number which the remitter will be required to input at the time of the
transaction. The main features of the service are mentioned below:

Inter Operable
Instant Fund Transfer
24/7 Availability
Paper Less
Secure
Better Fund Management
Transaction Limits - The transaction limits are in accordance with the RBIs circular on
Domestic Money Transfer. Accordingly, for cases where the Issuing and Beneficiary Cards
are Debit/ATM Cards, the per transaction limit will be Rs.5000 and the monthly limit will be
Rs.25,000 per remitter.

Cheque Book Request/Statement Request: At present, although statement & cheque book
request options are available at ATMs, these are available only for customers of that
particular bank. NFS aims to make this option inter operable wherein customers will be able
to avail the aforementioned services at NFS member bank ATMs who avail this particular
service from NPCI.

MEMBERS

1. Direct members
It should have a valid banking license issued by the RBI
It should hold RTGS Membership of the RBI
It should have a current account with the RBI
Banks should route their ATM transactions through their ATM switch
One-time fee of Rs. 3,00,000 + ST
2. Sub-members
Sub-members willing to join the NFS network should come through the sponsor bank
to NFS. The settlement of the transactions of sub-members would be done in the
books of the sponsor bank
3. White label ATM operators
White Label ATM operators authorized by the RBI under the Payment & Settlement
Systems Act 2007 to operate White Label ATMs in India should come through the
sponsor bank to NFS as per the extant guidelines of the RBI.
The settlement of the transactions acquired on the White Label ATMs of the operator
would be done in the books of the specified sponsor bank. As approved by the RBI,
the White Label ATM operators may have arrangements with multiple sponsor banks
One-time fee of Rs. 6,00,000 + ST from sponsor bank

Further, bank members need to share certain details with NFS, that includes:

Details of the existing ATM network of members

Details of participation of shared ATM network, if any
Details of connections and processing arrangements such as the location of ATM switch and
shared switch
IMMEDIATE PAYMENT SERVICE(IMPS)

Immediate Payment Service (IMPS) is an instant interbank electronic fund transfer service
through mobile phones. It is also being extended through other channels such as ATM,
Internet Banking, etc.
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.
Currently majority of interbank mobile fund transfer transactions are channelized through
NEFT mechanism. Under NEFT, the transactions are processed and settled in batches,
hence are not real time. Also, the transactions can be done only during the working hours
of the RTGS system.

In a typical transaction, following five parties would be involved,

1. Remitter(sender)
2. Remitter bank
3. Beneficiary(receiver)
4. Beneficiary bank
5. National Financial Switch - NPCI

Process Flow

1. Registration for Remitter

Registration with the mobile banking service of the bank
Get mobile money identifier(MMID) from the bank
Download software(application) for mobile banking or use SMS facility if provided by
bank

2. Registration for Beneficiary

Link your mobile number to the account in the respective bank
Get mobile money identifier(MMID) from the bank

3. For Remitter(to send money)

Login to the application and select the IMPS menu from the IMPS or use the SMS
facility in your mobile if your bank provides IMPS on SMS
Get Beneficiary Mobile number and MMID
Enter Beneficiary Mobile number, beneficiary MMID, Amount and your MPIN to send
Await confirmation SMS for the debit in your account and credit in beneficiary
account
Note the transaction reference number for any future query
Share your Mobile number and MMID with the remitter
Ask the remitter to send money using your Mobile number and MMID
Check the confirmation SMS for credit to your account from the remitter
Note the transaction reference number for any future query
Notes: Mobile Money Identification Number (MMID) is a seven digit number of which the
first four digits are the unique identification number of the bank offering IMPS.

You can add and approve only one beneficiary in a calendar day, which will be activated by
the internet banking system within 4 hours, if approved by you during the period from 6.00
AM to 8.00 PM (IST). Beneficiary approved after 8.00 PM will be activated on the next day
after 8.00 AM (IST). You can commence funds transfer to the new beneficiary only after its
activation. On the first day of activation, you can remit a maximum amount of Rs. 10000/-.
During the first 5 days after activation, you can transfer a total sum of Rs. 50,000/- to a
new beneficiary if activated by the system.

RUPAY

RuPay is an Indian domestic card scheme conceived and launched by the National
Payments Corporation of India (NPCI). It was created to fulfil the Reserve Bank of Indias
desire to have a domestic, open loop, and multilateral system of payments in India.

RuPay facilitates electronic payment at all Indian banks and financial institutions, and
competes with MasterCard and Visa in India. NPCI maintains ties with Discover Financial to
enable the card scheme to gain international acceptance.

RuPay cards are accepted at all automated teller machines (ATMs) across India
under National Financial Switch, and under the NPCI's agreement with DFS, RuPay cards are
accepted on the international Discover network.

RuPay cards are accepted at all PoS (point of sales) terminals in India. To enable this, RuPay
has certified 29 major banks in India to accept the RuPay card at their respective PoS
terminals located at different merchant locations.
NATIONAL AUTOMATED CLEARING HOUSE

From 1st May, 2016 NACH will replace ECS. You have to use NACH facility to
give auto instruction of debit from your bank account. ECS (electronic clearing
service) mandates used for doing Systematic Investment Plan (SIP) in Mutual
Funds is being replaced by National Automated Clearing House (NACH) a new
system of clearing. National Payments Corporation of India (NPCI) has implemented
NACH. All new mutual fund SIPs will have to be registered using NACH. This article
explains the Payment Systems in India, How Payment Systems have evolved, About
NACH, One Time Mandate Form for NACH.

What is NACH?

The National Payments Corporation of India (NPCI) has implemented an electronic

payment service termed as National Automated Clearing House (NACH) for banks,
financial institutions, Corporates and Government Departments. NACH, National
Automated Clearing House, is a funds clearing platform set up by NPCI similar to the
existing ECS of RBI

NACH has both Debit and Credit variants and it aims at facilitating interbank, high
volume, debit/credit transactions, which are bulk and repetitive in nature.
The primary motive of NACH is to handle low value, high-volume transactions
based on electronic files.
Ideally implementing this mandate will allow transactions to be cleared in real-time
mode rather than batch mode.
The NACH platform will have national footprint which will cover 82000+ bank
branches.
The new centralized ACH solution or NACH is expected to consolidate the current
multiple ECS systems and provide a framework for removal of local barriers
/inhibitors and harmonization of standards and practices.

NACH Credit is an electronic payment service used by an institution for affording credits
to a large number of beneficiaries in their bank accounts for the payment of dividend,
interest, salary, pension etc. by raising a single debit to the bank account of the user
institution.

What is difference between NACH and ECS?

The prevalent Electronic Clearing Service (ECS) in India is available at around 89 centers
in the country. While it is operated by the RBI at 15 centers, it is operated by commercial
banks at the remaining centers. The ECS model lacks a standardized operating model,
uses manual processes and has other inherent challenges such as inconsistent timelines
around post transactional query management and servicing.

NACH ECS

A robust Mandate Management System, that Mandate verification is done based on

will include a standardized mandate format physicals, resulting in verification issues
and a defined workflow for mandate and delayed timelines.
verification.

Unique mandate registration reference no will No such concept of a unique mandate

be available, which will allow for better registration reference number.
tracking.

Provision to capture destination banks unique Higher number of rejects observed on

mandate registration in the transaction file account of mandate related issues.
resulting in lesser rejects.

Same day presentation and settlement, Presentation and settlement is spread over
including returns processing. 3-4 day period.

Well defined Dispute Management System; Is Dispute management is left to the

electronic platform to raise and resolve issues. discretion of the Destination Bank
Oversight by the NPCI.

NACH applies to all ECS transactions.

From 1st May, 2016 will be applicable to all your ECS transactions. This applies to Utility
Bills, Insurance Premiums, Credit Card Bills, SIP of Mutual Funds, or any
payment, which is recurring in nature.

Conversion of the existing ECS to NACH will NOT be done default. If you want to register
fresh ECS or when your ECS tenure expires you would have to move to NACH.

Most of the Organizations will provide Enrollment for NACH by filling up the physical form.
But Banks will be allowing NACH enrollment electronically through E-Mandate as well.

NACH Mandate Form

Benefit of NACH in Mutual Funds

NACH cuts the registration time for a SIP from the current 30 days to 10-15 days.

Once NACH One Time mandate is registered an investor can invest offline without having
to write a cheque or transferring money online via a payment gateway. Investors can
make use of this payment mode for their Lump-sum Mutual Fund investments apart from
SIPs in the same folio with the fund-house. Realization of funds from the investors
account happens on the day which helps investors track their payments on time.
 How will NACH modify investing in mutual funds?

NACH is a one-time registration process which allows an investor to do lump sum or

SIP investments in mutual funds. By registering this mandate, you will authorize the
relevant bank (which is registered in your Folio) to debit a certain maximum amount per
day, towards investment in a mutual fund scheme of the fund house. This mandate can
either be given for a fixed period (say one year) or perpetual till you cancel it. One
mandate works for one folio in the fund house.

If you have SIPs in different fund houses, you have to fill separate NACH forms.

NACH will cover all core banking platform enabled bank branches and will not be
restricted to only ECS locations as per current ECS model.

For Lump Sum Purchase:

Investor needs to submit the One Time Mandate NACH form through the AMCs
aggregator as a standalone form for registration of Bank details.
Post successful registration, an investor can avail for additional purchase, SIP
transactions and other modes of purchase transactions which will be introduced shortly
viz SMS and transactions through phone etc.
One Time Mandate NACH form can also be registered to avail of email/fax transactions
that we have enabled for our investors. Presently investors need to transfer the funds
through NEFT/RTGS mode before sending email/fax transaction. By registering One Time
Mandate NACH form which is a one-time process, investor can then just submit an
email/fax transaction conveniently and avoid the fund transfer that needs to be effected
for each and every transaction.

SIP Registration:

In case you wish to register for SIP, you need to submit the SIP registration form along
with the One Time Mandate NACH form to ensure you avail the advantages of NACH in
case your bank is activated for NACH.
In case your bank is not activated for NACH, you will have to fill in the ECS mandate form
which through which the SIP will be processed; based on the existing procedure.
Note: In case your registered bank, lists amongst the NACH activated list of banks, then
the registration of SIP will be done within 15 working days, else it will be done in 30
working days as per existing process.

Does NACH affect existing Mutual Fund SIPs?

No. Existing Investors need not worry about ongoing SIPs. The existing mandates will
continue to be valid the present SIP cycle. No changes will be made to your ongoing SIPs.

Once the tenure or current ECS mandate ends, if you wish to renew the SIP, you will have
to fill in a NACH form, for the same.

What is NACH OTM (NACH One Time Mandate) Form?

Following image shows the NACH OTM for DSP Blackrock. You need to register it once
with following details. Attach a cancelled cheque/copy for validation. Note: We are just
using DSP BlackRock as example.

Account Number, Bank Name,IFSC/MICR Code,Branch

 Mention the maximum limit per day. Mention it in words and also in figures.
The time for which the Mandate is effective. Period starting from. By default ending
period is 31/Dec/2099.
Folio Number/Application Number/Mobile No and Email ID.
Your signature as per your Bank account.

NACH OTM Mandate Form

How to register for NACH?

Fill in the NACH OTM Mandate Form.

Submit it to your advisor or Mutual Fund company (AMC)
OTM Form will be sent to your bank for registration
OTM Form will be confirmed in 10-12 days
Once your OTM is registered with a Mutual Fund company you can invest without issuing
cheques.

Investing in Mutual Funds using NACH OTM

Which Banks support NACH?

 The list of banks activated for NACH system keep changing on regular intervals with
introduction of new banks. Presently, the NACH system is applicable to about
1000 banks. To view the list of banks, you can visit NPCI website and download Excel file
from Products & Services > National Automated Clearing House > NACH Live Banks

Advantages of Registering SIP through NACH

1 Giving Mandate for Mutual Fund SIP using NACH will reduce the time for
registration of Mutual Fund SIP from 30 working days in normal ECS
registration to 15 working days. The time gets reduced because of Elimination
of physical movement of mandate forms to destination bank branch and work on
scanned images, Registration online (through Bank Portal) and Positive confirmation
of Registration as compared to today where 100% confirmation is not received across
participating banks.

2 Due to the centralized and automated nature of the process, the probability of errors
is reduced significantly.

3 Since there are no paper-flows to the bank branches, there will be no more ECS
mandate not found related errors

4 You can also avoid any internet banking related issues for payment.

5 Investors need not submit a physical cheque against each of their purchase
transaction. The amount will automatically get debited from the investors bank
registered with NPCI.

How does NACH benefits consumers, banks and organizations?

For Consumers:
Timely payment of bills /installments /premium without remembering the due dates.
Faster processing time and less manual intervention.

For Banks:
Less dependence on cheques and paper based transactions.
Faster processing time and less manual intervention.
Better service to customers and affiliate organizations.

For organizations:
Better customer service.
Timely dispersal of salaries, dividends and clearance of bills.
Facilitates automatic credit of variable benefits like allowances, scholarships etc.
Less dependence on cheques and paper transactions
 Cheque: Clearing Process, CTS 2010

Cheque is like a written instruction to the bank asking it to pay the persons whose name
is written on cheque the sum of money. Cheque is just a piece of paper and to get the
money it has to be cleared.

Beginning January 1, 2013 Cheque Truncation System (CTS) was implemented, whereby
flow of the physical movement of Cheque was eliminated in the truncation process.
Instead an electronic image of the cheque will be sent along with the relevant key
information.

Cheque is like a written instruction to the bank asking it to pay the persons whose name
is written on cheque the sum of money. The person who writes the Cheque is called
drawer and to whom it is paid is called as payee.

So, now how is Cheque cleared?

Let us say Ram gave an A/C payee cheque to Shyam. Let us see the sequence of events
how Shyam gets the money to his account:

1. Shyam deposits cheque to his bank.

2. Shyams bank processes the cheque and sends a request to Rams bank for payment

3 If Rams bank has funds in his account, his bank will process the payment and release
the funds to Shyams Bank
4 Shyams Bank will process the payment and credits the funds into his bank account.

Clearing process for non CTC 2010 cheques

The Payee would deposit the cheque is his/her bank. If the payee or beneficiary of
cheque has an account in the same bank in the same city the funds are credited into his
account through internal arrangement of the bank
If the beneficiary has an account with any other bank in the same or in any other city,
then his banker would ensure that funds are collected from the payers banker through a
clearing house. A clearing house is an association of banks that facilitates payments
through cheques between different bank branches within a city / place. There are more
than 1000 clearing houses operating all over the country facilitating cheque payments.
These are managed by the RBI, State Bank of India and other public sector banks. To
identify the paying bank, the clearing house looks at checks routing number, MICR, the
nine-digit number at the bottom of your cheque, to the right of your account number. It
identifies postal code/city and state of the origin of the cheque.

MICR of cheque

The clearing house presents paying bank with the cheque along with a payment request
to drawees bank, which checks if there are sufficient funds in the account of drawer to
pay money.
If the drawers bank decides to pay then the clearing bank proceeds to settle the check,
debiting drawers bank and crediting the payees bank for the value of the check. The
paying bank debits the amount from the drawers account.
 The clearing process is shown in following picture

Cheque Clearing Process before Jan 1 2013

Time taken to clear the cheque

How fast the money would be deposited into Shyams account depends on whether the
whether bank of Ram and Shyam cheques are of same city.

Based on this cheques are of two kinds:

Local Cheques These are cheques whereby the cheque issuer bank branch and the
receiver bank branch are in the same city
Outstation Cheques These are cheques whereby the cheque issuer bank branch and
the receiver bank branch are in different cities

Local Cheques All Local Cheques must be cleared on a T+1 basis. i.e., If I Deposit a
local cheque into my bank account today (irrespective of which bank the cheque is drawn
or deposited) the funds must reach my account by End-Of-Day Tomorrow. Of course, this
is only if the deposit happened before the cut-off time for today. For ex: Lets say ICICI
Bank has a cut of time of 1:00 PM. So, all cheques deposited after 1:00 PM the previous
day and those deposited before 1:00 PM today are processed in one batch and sent for
payment. If you deposit your cheque after 1:00 PM, it will be processed only tomorrow
and funds will be available one day after that.
 Outstation Cheques Processing of Outstation Cheques depends on location of
drawees bank.

Banks in State Capitals Max 7 days

Banks in Major Cities Max 10 days
Banks in Other Locations Max 14 days

RBIs Collection of Instruments has answers to questions like What happens if cheques /
instruments are lost in transit / in clearing process?, My bank refuses to accept outstation
cheques for collection. Is there any remedy?
In addition to this, some banks are notorious of doing money laundering in between. i.e.
the Money is debited from the issuer's account but is credited later and in between, they
launder the money for interest. Many a times, the cheque deposit boxes remain
unattended for more than a couple of days more in case of national holidays.

Cheque Truncation System

Cheque Truncation System (CTS) or Image-based Clearing System (ICS), in India,

is a project undertaken by the Reserve Bank of India RBI, for faster clearing of
cheques. CTS is basically an online image-based cheque clearing system where cheque
images are captured at the collecting bank branch and transmitted electronically.
Truncation means, stopping the flow of the physical cheques issued by a drawer to the
drawee branch. The physical instrument is truncated at some point en-route to the
drawee branch and an electronic image of the cheque is sent to the drawee branch along
with the relevant information like the MICR fields, date of presentation, presenting banks
etc. So the process now becomes:

In CTS, the presenting bank (or its branch) captures the data (on the MICR band) and the
images of a cheque using their Capture System (comprising of a scanner, core banking or
other application
The collecting bank (presenting bank) sends the data and captured images duly signed
and encrypted to the central processing location (Clearing House) for onward
transmission to the paying bank (destination or drawee bank). For the purpose of
participation the presenting and drawee banks are provided with an interface / gateway
called the Clearing House Interface (CHI) that enables them to connect and transmit data
and images in a secure and safe manner to the Clearing House (CH).
The Clearing House processes the data, arrives at the settlement figure and routes the
images and requisite data to the drawee banks. This is called the presentation clearing.
The drawee banks through their CHIs receive the images and data from the Clearing
House for payment processing. The drawee CHIs also generate the return file for unpaid
instruments.

For customers clearing process of CTS 2010 is no different from the use of
traditional clearing infrastructure for clearing paper cheques. Customers
continue to use cheques as at present, except to :

Use image-friendly-colored-inks while writing the cheques

Avoid any alterations or corrections thereon. For any change in the payees name,
amount in figures or in words, fresh cheque leaves should be used by customers, as this
will facilitate smooth passage through image based clearing system.
As images of cheques (and not the physical cheques) alone need to move in CTS:

It is possible for the removal of the restriction of geographical jurisdiction normally

associated with the paper cheque clearing. Hence cheques would be multi-city.
This would result in effective reduction in the time required for payment of cheques, the
associated cost of transit and delays in processing, etc.

Image Clearing System

The security, integrity, non-repudiation and authenticity of the data and image
transmitted from the presenting bank to the paying bank through Clearing House are
ensured using the Public Key Infrastructure (PKI). CTS is compliant to the requirements of
the IT Act, 2000. It has been made mandatory for the presenting bank to sign the images
and data from the point of origin itself. PKI is used throughout the entire cycle covering
capture system, the presenting bank, the clearing house and the paying bank. The PKI
standards used are in accordance with the appropriate Indian acts and notifications of
Controller of Certifying Authority (CCA).

Cheque truncation eliminates the need to move the physical instruments across
branches, except in exceptional circumstances, thus speeding up the process of
collection or realization of cheques. The Reserve Bank had implemented CTS in the
National Capital Region (NCR), New Delhi and Chennai with effect from February 1, 2008
and September 24, 2011. After migration of the entire cheque volume from MICR system
to CTS, the traditional MICR-based cheque processing has been discontinued in these two
locations. Based on the advantages realized by the stakeholders and the experienced
gained from the roll-out in these centers, it was decided to operationalize CTS across the
country by Jan 1 2013. For more details read RBIs FAQ on Cheque Truncation System

Cheques for CTS 2010

All types of cheques can be presented for clearing through CTS. But to achieve
standardization of cheques issued by banks across the country and to reduce cheque
frauds set of benchmarks called as CTS-2010 standard are introduced. These include
provision of mandatory minimum security features on cheque forms like quality of paper,
watermark, banks logo in invisible ink, void pantograph, etc., and standardization of field
placements on cheques. As shown in picture below (Ref: Economic Times Check your
 cheque status)

4. Branch address with IFSC code printed top of the cheque

5. Date in did/mm/yyyy format with boxes
6. Printers name with CTS-2010 in left side of cheque
7. A pantograph which shows VOID/COPY while taking photocopy of the cheque below the
account number
8. New rupee symbol instead of bilingual format
9. Please sign above is mentioned on bottom right of the cheque
10. Watermark CTS INDIA to be visible cheque is held against any light.
11. Ultra Violet logo of Bank printed at upper left corner of cheque to be visible in UV lamps

CTS 2010 Standards

1 Paper (At Manufacturing Stage) - CTS-2010 Standard paper should not glow under
Ultra-Violet (UV) light i.e., it should be UV dull.

2 Watermark (At Manufacturing Stage) - All cheques shall carry a standardized

watermark, with the words CTS-INDIA which can be seen when held against any
light source.

3 VOID pantograph (At Printing Stage) - This feature should not be visible on the
scanned image at the resolution specified in CTS but should be clearly visible in
photocopies and scanned colour images as resolution used in such cases would be
above the prescribed CTS standards.

4 Banks logo printed with ultra-violet ink (At Printing Stage) - Banks logo shall be
printed in ultra-violet (UV) ink. The logo will be captured by / visible in UV-enabled
scanners / lamps. It will establish genuineness of a cheque.

5 Field placements of a cheque - Placement of significant fields on the cheque forms

shall be mandated. However, placement of additional fields shall be left to banks.
 This will enable data capturing by Optical / Image Character Recognition (OCR /
ICR) engines in offline mode and help banks in automating their payment
processes.

6 Mandating colours and background - Light / Pastel colours shall be mandated for
cheques so that Print / Dynamic Contrast Ratio (PCR / DCR) is more than 60% for
ensuring better quality and content of images. The colours will be finalized in
consultation with IBA / NPCI.

7 Clutter free background - Background of cheques shall be kept as clutter free as

possible for improving quality and clarity of images.

8 Prohibiting alterations / corrections on cheques - No changes / corrections should

be carried out on the cheques (other than for date validation purposes, if
required).

9 Printing of account field - All cheques should, as far as possible, be issued with the
account number field pre- printed. This should be considered must for current
account holders and corporate customers.

10 Use of UV feature on cheque images - Though banks logo in UV ink is a strong

deterrent for forgery and duplicate cheques, there are challenges in terms of
increased image size, stabilization of UV technology in CTS environment,
availability of UV-enabled scanners, etc., in implementing this feature. However,
the benefits outweigh the limitations and hence this feature shall be incorporated.

Sample old and new (CTS 2010 compliant) cheques issued by State Bank
of India (SBI) are shown below

State Bank of India Cheque before CTS 2010

 SBI cheque with CTC 2010 compliance

How does CTS 2010 affect customers?

If you have issued post-dated cheques (PDCs) (say for your home or auto loan EMIs), you
will have to issue fresh cheques.
If you have opted for the ECS (electronic clearing system) mode, the new system will
not impact you.
For issuing cheque after Mar 31 2013 you need cheques which are CTS-2010 compliant.
Shorter clearing cycle
Superior verification and reconciliation process
No geographical restrictions as to jurisdiction
Operational efficiency for banks and customers alike
Reduction in operational risk and risks associated with paper clearing
No collection charges for collection of cheque drawn on a bank located within the grid.

How does CTS 2010 benefit the banking system?

Grid Based CTS provides significant cost savings.

Consolidation of clearing locations into a few grids minimize the investment in MICR
machines and related AMC costs.
Banks will benefit from economies of scale as the grid CTS obviates the need for
establishing inward cheque processing infrastructure at various clearing locations.
With the merger of many local clearing houses with CTS grids, the settlements which
were earlier spread across numerous clearing house locations have been subsumed
into a single settlement, thereby significantly reducing the liquidity requirements for
the banks.
CTS will also result in other benefits in terms of reduction in the cheque processing
fee, reduction in operational overhead, elimination of clearing differences and
reconciliation issues etc.