Pariksha SaathiLesson 5 of 10 · Banking and Financial Awareness
Payment and Settlement Systems: NEFT, RTGS, IMPS, UPI and NPCI
Drafted with AI assistance and fact-checked on 28 October 2026; not yet read line by line by a human editor. Spotted a mistake? Tell us. Editorial standards & corrections
The legal base
A payment system moves money from payer to payee, and a settlement system finally squares the accounts between the banks involved. The Payment and Settlement Systems Act 2007, in force from August 2008, makes the RBI the authority for all payment systems in India. No one may run a payment system without RBI authorisation, and the RBI oversees them through its Board for Regulation and Supervision of Payment and Settlement Systems (BPSS). Payments are settled either gross, one by one, or net, where many transactions are added up and only the net amount moves between banks at fixed times. Gross settlement removes the risk that one bank's failure upsets the others; net settlement needs less money in hand.
RTGS and NEFT
Real Time Gross Settlement (RTGS), started in March 2004, settles each instruction individually and immediately in the RBI's books, so the payment is final and cannot be reversed. It is meant for large transfers, with a minimum of Rs 2 lakh and no upper limit. National Electronic Funds Transfer (NEFT), started in November 2005, settles transfers in half-hourly batches on a deferred net basis and has no minimum amount, which suits everyday transfers. Both are run by the RBI and both became available round the clock, NEFT from December 2019 and RTGS from December 2020. Both need the beneficiary's account number and the branch's IFSC.
NPCI
The National Payments Corporation of India was set up in December 2008 by the RBI and the Indian Banks' Association under the PSS Act as the umbrella body for retail payments. It is a not-for-profit company owned by banks, with its head office in Mumbai. In 2009 it took over the National Financial Switch (NFS), which links the ATMs of different banks, from IDRBT. Its products include IMPS, UPI, RuPay, NACH, AePS, the Cheque Truncation System, the Bharat Bill Payment System and the National Electronic Toll Collection (FASTag) system.
IMPS and UPI
Immediate Payment Service (IMPS), launched by NPCI in November 2010, gives instant interbank transfers round the clock through mobile phones, internet banking or ATMs, using either account number and IFSC or a mobile number with a Mobile Money Identifier (MMID). Unified Payments Interface (UPI), built on the IMPS system, was launched by NPCI in 2016. It links several bank accounts to one mobile app and lets users pay with a virtual payment address (UPI ID) or a QR code, so the payer never needs the payee's account details; every payment is authorised with a UPI PIN. UPI supports both sending money (push) and collect requests (pull). The government's BHIM app (Bharat Interface for Money), released in December 2016, runs on UPI.
NACH, AePS and BBPS
National Automated Clearing House (NACH) handles bulk and repeat payments such as salaries, pensions, dividends, subsidies and loan EMIs, replacing the older Electronic Clearing Service (ECS); its Aadhaar Payment Bridge credits government benefits to Aadhaar-linked accounts. Aadhaar enabled Payment System (AePS) lets a customer withdraw or deposit cash, check the balance or transfer money at a business correspondent's micro-ATM using the Aadhaar number and a fingerprint instead of a card or PIN, which serves villages without branches. Bharat Bill Payment System (BBPS) is a single, interoperable platform for paying electricity, water, gas, telephone and other bills through any bank, app or agent; an NPCI unit acts as the Bharat Bill Payment Central Unit, and banks and other firms act as operating units.
Cards and wallets
A debit card draws money directly from the holder's account. A credit card gives a revolving line of credit; the holder pays later and is charged interest if the bill is not paid in full by the due date. Prepaid payment instruments (PPIs), such as mobile wallets and gift cards, store value paid in advance. A closed-system PPI can be used only with the firm that issued it, while other PPIs, issued by banks and RBI-authorised non-banks, can be used at many merchants. RuPay, launched by NPCI in 2012 (the name joins Rupee and Payment), is India's own card network; it keeps domestic card payments processed within India at lower cost than foreign networks. Point of sale (PoS) terminals accept cards at shops. The first ATM in India was set up by HSBC in Mumbai in 1987, and ATMs owned and run by non-bank companies are called white-label ATMs.
Key facts
- Payment and Settlement Systems Act 2007 (in force August 2008): the RBI authorises and oversees every payment system through the BPSS.
- RTGS (March 2004): real-time, one-by-one settlement for large transfers, minimum Rs 2 lakh; NEFT (November 2005): half-hourly batches, no minimum.
- NEFT became available round the clock in December 2019 and RTGS in December 2020; both are run by the RBI, not by NPCI.
- NPCI: set up December 2008 by the RBI and the Indian Banks' Association; a not-for-profit company owned by banks; head office Mumbai.
- IMPS (November 2010): instant transfers at any hour using account number and IFSC, or mobile number with MMID.
- UPI (2016) runs on the IMPS system with a virtual payment address and UPI PIN; the BHIM app was released in December 2016.
- NACH replaced ECS for bulk payments; AePS uses the Aadhaar number and a fingerprint at a micro-ATM; BBPS handles bill payments.
- RuPay (2012) = Rupee + Payment, India's own card network, run by NPCI.
- First ATM in India: HSBC, Mumbai, 1987; ATMs run by non-bank companies are white-label ATMs.
Quick revision
PSS Act 2007 (in force August 2008), RBI authorises payment systems via BPSS; RTGS March 2004, gross and real time, minimum Rs 2 lakh; NEFT November 2005, half-hourly deferred net batches; both run by RBI, 24x7 from 2019 (NEFT) and 2020 (RTGS); NPCI December 2008 by RBI and IBA, HQ Mumbai; IMPS 2010; UPI 2016, BHIM December 2016; NACH replaced ECS; AePS via Aadhaar and fingerprint; BBPS for bills; RuPay 2012; first ATM HSBC Mumbai 1987.