NPCI Vajra – Explore about National Payments Corporation of India Platform

2 March 2020 | 2036 Views | By Abhinav Mishra

The digital revolution is the new wave in all sectors across the globe. With all other sectors progressing toward digitalization, banking is also all around the globe shifting towards digitalization. Banks across all areas are making huge investments in digital initiatives in order to uphold a competitive edge and convey the maximum to its customers. The adoption of digitalization is very important for the banking sector to keep up with the digitalizing economy. By integrating digitalization, banks can provide enriched customer experience as it offers convenience to customers and helps in saving a lot of their time. Digitalization has transformed many manual processes, transactions, and activities into digital services. More so, with the coming in of the blockchain technology worldwide, banking is revolutionizing at a fast pace. Fascinated with the safety features of the blockchain technology, the National Payment Corporation of India (NPCI) has propelled a blockchain-based payments platform called “Vajra”.

About National Payments Corporation of India (NPCI)

What is the full form of NPCI ?

NPCI, or, National Payments Corporation of India is an umbrella company for operating retail payments and settlement systems in India.

What is the work of NPCI ? Does NPCI comes under government company?

It is an initiative of Reserve Bank of India (RBI) and Indian Banks Association (IBA) under the provisions of the Payment and Settlement Systems Act, 2007, for generating a robust and efficient Payment & Settlement Infrastructure in India. As of today, 56 banks are shareholders of the NPCI, which is supported by 10 banks, namely: State Financial institution of India, Punjab Nationwide Financial institution, Canara Financial institution, Financial institution of Baroda, Union Financial institution of India, Financial institution of India, ICICI Financial institution, HDFC Financial institution, Citibank and HSBC. National Payments Corporation of India has founded the National Electronic Toll Collection (NETC) program to satisfy the electronic tolling requirements via introducing the FASTag.

From riding high on the success of clocking landmark one billion transactions on UPI (unified payments interface) to announcing international foray to developing payments on blockchain, the National Payments Corporation of India (NPCI) has now introduced in the new blockchain-based platform “Vajra”, which aims at creating a more robust and efficient automated payment platform. It principally is a permissioned platform that allows quick payment settlements, clearing, dispute resolution, etc. between banks using the DLT (distributed ledger tech) and Smart Contracts.

The access to the platform is controlled by NPCI, as NPCI has the sole right to add or delete any node or say the banks to the blockchain network. It provides a set of APIs, adapters that can be used by the participating nodes to use the platform. Through the use of APIs and adapters, the platform is easy to integrate with the existing bank systems.

Understanding the Vajra Platform

A fascinating fact is that not everyone is permitted to participate in this network. It is a permissioned blockchain platform meaning that only registered and authorized parties under a network administrator can be part of the blockchain network. There are three nodes of the Vajra platform:

Notary Node– In this, a transaction is validated only if the Aadhar biometric is used for authentication. This node performs the action of receiving transactions from the clearing house node.
Clearing House Node– This node holds the admin rights of this platform and is controlled and operated by the NPCI.
Participant Node– The banks represent these nodes and they can receive, post, and view the transactions.

Overview of Vajra’s Architecture

The Clearing House Node has the right to add or delete any nodes on the platform. The node will authenticate every external party that interacts with the participants of the platform. Vajra facilitates API interactions with key management and defined security procedures and security in data access.

How Vajra Works

Vajra can be accessed by multiple payment entities performing transactions via cross-platform apps. The financial institution nodes get requests from APIs and course of them via the Vajra platform. The system has self-executing contracts comprising enterprise guidelines within the type of good contracts. It works in five simple steps, as mentioned by NPCI:

At the first step, the user initiates a transaction on the Vajra app or MicroATM through online banking, e-commerce, or point-of-sale and the request for collection, deposit, or payment is guided to the server of the payer, payee, or the issuing bank. Next, the nodes or banks will then receive and record the transactions on the platform using APIs, adapters, or DLT.

After this, the smart contracts validate and trigger transactions depending on the predefined business rules. The transactions are thus recorded on the blockchain through successful clearing. As a final step, every fifteen minutes, the NPCI clears files and fees from the blockchain platform and posts it for settlement processing to the Reserve Bank of India.

Benefits of the Vajra Platform

The Vajra platform is established to warrant minimal processing time for reconciliation and for faster dispute resolution while implementing the cryptography technology to increase the security of payment transactions. The use of cryptography in the Vajra platform secures the stored data. As cryptography protects the data by converting it into codes, these codes are accessible only for the authorized entities as authorized by the clearing house node. Vajra intensely facilitates transparency in real-time transactions, takes minimal time for the clearing process, settlement cycle, and processing of activities like reconciliation and reporting.

According to NPCI, the following are the benefits of the Vajra platform:

Improved security using block chain and reduction in manual reconciliations, thus reducing the cost of operations for payment companies.
For the end-users, the introduction of the Vajra Platform should make the process of payments even more seamless than it is right now.
The use of DLT and the resulting audit trail should also make it easier to track and resolve payment disputes, thus leading to better transparency. As compared to the situation right now where the payment disputes raised by users take at least three working days to be resolved.
Additionally, to improve the security of payments and to make the process faster, the Unique Identification Authority of India (UIDAI) will also use the Vajra Platform for Aadhar authentication.
Better and faster dispute resolution because of decentralized and centralized data storage service.
The Vajra platform aims to safeguard privacy for transactions as it encrypts them into digital signatures, thus preventing unauthorized entities from reading and/or corrupting transaction data.

Concluding lines

Notably, the Indian government has always remained against the usage of crypto currency, a form of digital money that uses blockchain technology for exchange. It neither declared the usage of crypto currencies legal nor illegal. However, this time the government had adopted one of its features, which is to facilitate transactions via block chain. Block chain adoption in India has been increasing as officials in the country are trying to put together a regulatory framework to govern the technology. At present, the clearing and settlement course includes a number of unnecessary events transacting with one another, which needs some degree of intermediation from a centralized regulator. Bold steps have been taken by the Reserve Bank of India in strengthening and facilitating the Payment and Settlement systems in banks. The Indian government, banks, fintech companies have been constantly innovating and changing the way India spends its money. At the same time, digital revolution also elevates new challenges to the stability and the integrity of the financial system and the protection of consumers. NPCI appears to be taking no chance whatsoever of missing the FinTech bus. Vajra being the first step designed to fasten the process of payment clearing and settlement of NPCI products. It aims to provide increased security to the transactions as only the registered entities on the network can access the platform. This is just a beginning towards an new era of blockchain technology and India being one of the largest democracy in the world will play important role in spreading awareness, regarding Blockchain technology and it’s uses in variety of cases and instances.