NPCI transforming Indian retail payment system

Navneet Kumar

The cooperative Banks must hasten adoption of NPCI product and services, which are expected as a minimum level of service by the customers, says Navneet Kumar of National Payments Corporation of India (NPCI) in an interview with Paulomi Chakraborty of Elets News Network (ENN)

What role is the NPCI playing in rural banks and financial institutions?

NPCI is an umbrella organisation for all retail payments system in India, set up in 2008 with the guidance and support of the RBI and Indian Banks’ Association. This can be looked at from two perspectives – the member banks and financial institutions and their customers i.e. the end customers. From member banks and financial institutions perspective, NPCI’s primary role is to provide a provision for a standard and interoperable environment along with settlement and dispute resolution mechanisms – typical of a payment network. All these ensure value additions for the banks’ end customer – for eg. earlier bank customers would be able to transact on their bank own ATM or ATMs of other banks with which they would have bilateral arrangements or ATMs of a small network of a few groups of banks that came together; whereas NPCI makes this a national network – allowing the customer of a bank to use ATMs of any NPCI member bank. This is quite attractive from banks’ perspective as their customer get more transaction points without having to invest in ATMs directly.

In a recent move NPCI launched Unified Payment Interface (UPI) and made it functional too. How is UPI benefitting the rural banking sector?

These are early days for UPI even from mainline commercial banks’ perspective. Adoption is on the rise and transactions would increase but something as ground breaking as this would need a lot of treading over customer learning curve as well for the rural banking sector and their customers alike. While many cooperative banks have expressed interest in the same, most of them are having footprint in the urban landscape – TJSB Sahkari Bank was, in fact, part of the pilot and has gone live now. It has done exceptionally well for themselves among the mainline commercial banks.

IT has been adopted by entire banking industry. To what extent it has been adopted in the rural banking sector?

A great deal. With NPCI providing level-playing field in terms of systems plus processes, security, charges, etc and good support from the Application Service Providers for the ecosystem reducing the burden on the banks, the technology adoption by the rural banking sector is near whole.

NABARD has set aside Financial Inclusion Technology Fund (FITF) with which they provide financial support for the CBS for State plus District Central Cooperative Banks (DCCBs) and Micro ATM for Regional Rural Banks (RRBs), which has further helped to adopt technology at a faster pace by these banks. IFTAS is another entity that is doing focussed work for this segment, which will benefit technology adoption further.

What steps do you think the rural banking or cooperative banking sector should adopt to bring them at par with the entire banking sector?

Apart from the internal steps mentioned earlier, the cooperative banks must hasten adoption of NPCI product and services, which are expected as a minimum level of service by the customers, even adopt aspiration products that their customer would choose from other banks. Innovate around these product and services to offer custom solutions to another sector – for eg. MFIs – we are in the process of facilitating certain pilots. They must recognise that some of the activities like mobile seeding and Aadhaar seeding is not done from compliance perspective but as a potential revenue source.

They must also invest in customer education on products and also push for basic financial literacy.

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