Loan Singh Answers – Which are the Digital Payments in India (Part-2)

Digital-Payments-in-India Part 2


In Part-1, of ‘Which are the Digital Payments in India?’, we discussed digital payments such as NEFT, UPI, ECS, Mobile Banking, and more. In Part-2, we will explore some more Digital Payments. Without wasting further time, let’s dive into it.



In 2013, The National Payments Corporation of India implemented ‘National Automated Clearing House’ for banks, financial institutions, digital lending platforms, corporate and various arms of the government; to enable a web based solution to facilitate interbank, high volume & electronic transactions which are repetitive and periodic in nature.

  • Used for making bulk transactions such as dividends, subsidies, EMIs, interest, pension, etc.
  • Also used for collection of payments such as electricity, water, loans, investments, mutual funds, etc.
  • It was setup to consolidate multiple ECS systems running across India
  • It is expected to cover the entire core banking enabled bank branches, as well
  • NPCI intends to provide a single set of rules via NACH
  • NACH is set to provide support to Aadhaar based transactions, as well

Benefits of NACH

  • Avoids high transaction fees – generally levied by credit card companies
  • Saves processing charges of paper based cheque transactions
  • Financial inclusion through Aadhaar Payment Bridge (APB) system helps easy transfer of subsidies
  • Middlemen are avoided
  • NACH is ISO2002 compliant, and follows the best security standards
  • It clears-up the barriers, or inhibitors, that affected standard practices
  • It is robust, secure and scalable
  • NACH is cost efficient and can be data validated at multiple levels
  • Enables same day processing, despite the bulk number

Being a digital lending platform, Loan Singh is NACH enabled. This means that a borrower can opt for an auto debit feature while applying for an online personal loan. You don’t have to keep track of your online personal loan EMI repayments. By providing Loan Singh with a NACH mandate to debit the EMI amount directly from your account, you are easily preventing the risk of defaulting on EMI payments. This also makes it a simple and stress free option.



Real Time Gross Settlement (RTGS) is another electronic funds transfer system maintained by the Reserve Bank of India (RBI).

  • RTGS is a continuous, or real-time, settlement of funds transfer
  • It works on an order-by-order basis (unlike the batch wise process of NEFT)
  • The fund settlement takes place in the books of RBI; hence it is final and irrevocable
  • It is primarily used for large value transactions. The minimum amount being Rs.2,00,000
  • There is no upper limit for RTGS transactions
  • The beneficiary bank needs to credit the beneficiary’s account within 30 minutes of fund transfer
  • Fund transfers are done in half hourly batches between 8:00 am to 6:30 pm
  • No fund transfers are done on public holidays, Sundays and some Saturdays (2nd and 4th of every month)

RTGS Charges

Inward transactions at destination bank branches – Free

Outward transactions from originating bank

  • For transactions between Rs.2,00,000 & Rs.5,00,000 – Rs.30 + GST
  • For transactions above Rs.5,00,000 – Rs.55 + GST

RTGS Requirements

The remitting customer has to furnish the following information for initiating an RTGS remittance

  • The amount to be remitted
  • Remitting customer’s account number
  • Beneficiary’s name, bank and branch
  • IFSC code of receiving branch



Around 4 years ago, some of you might remember seeing advertisements in newspapers wherein banks urged us to stop circulating non-CTS compliant cheques and to replace our old cheque books with new CTS enabled ones. It is time to learn about this ‘CTS’.

In the beginning of April, of 2013, Cheque Truncation System (CTS) was implemented whereby the flow of the physical movement of cheque would be eliminated in the cheque clearing process. Instead, an electronic image would be sent forward along with the relevant information. The previous cheque standard was phased-out since then. The current cheque system, since 2013, is enabled with CTS.

Benefits of CTS

  • No need for movement of physical cheques across branches
  • Eliminates costs associated with movement of physical cheques
  • Time required for transportation is reduced
  • It is a system being followed around the world
  • Makes the widely used offline cheque process more efficient
  • No fear of loss of physical cheques
  • Quicker clearance with shorter clearing cycle
  • Quicker disbursements as same day clearance is enabled
  • CTS takes out the risk of fraud
  • Integration of multiple locations will reduce geographical restrictions



Started by NPCI, Unstructured Supplementary Service Data (USSD) channel allows mobile banking transactions via basic feature mobile phones. There is no need to have a mobile internet data facility to enable USSD on feature phones. It is envisioned to provide financial deepening and inclusion of the under-banked society into mainstream banking services. This ‘*99#’ service was launched to take banking services to every common man across India. ‘*99#’ is a common number that helps banking customers to avail of USSD on their mobile phones and transact using an interactive menu. USSD is currently offered by more than 50 leading banks, and all GSM service providers can be accessed in 12 different languages.


  • A new USSD account would need the applicant to provide KYC documents
  • The bank account should be linked to your mobile number
  • Need to register for USSD/Mobile banking
  • Get an MMID and MPIN (similar to IMPS)
  • It takes 2-3 minutes for USSD to be activated on your feature phone
  • To start the activation dial *99# (Common across all Telecom Service Providers)


You can check your Bank balance, transfer funds between interbank accounts, do a balance enquiry and get a mini balance statement, change MPIN, generate OTP, etc. You can also transfer funds making use of MMID, MPIN and OTP; with transfer limit being Rs.5,000 per day and Rs.50,000 per year. The transaction cost is Rs.0.50 per transaction.


Debit Cards

Banks offer, their customers, cards with better security, convenience and control over the payment method. The cards offered are Debit Cards and Credit Cards. These cards offer a 2-factor authentication i.e. PIN and OTP. RuPay, MasterCard and Visa are some of the card payment systems used by banks. Debit cards, as we all know, are plastic cards that allow us to withdraw money directly from our bank account. The money can be withdrawn from an ATM. Debit cards can also be used for transactions on web stores. A debit card is tied directly to your banking account.


To be able to own a debit card, you need to operate a bank account by providing a full KYC. Being an account holder entitles you to receive a debit card. You also receive a PIN to operate the debit card. The debit card makes use of the money you already have in your account.


A debit card firstly helps you to make payments online on websites using the debit card number and CVV. A debit card allows you to check your balance at an ATM machine. It can also be used to send money to customers of the same bank, or of others.


Credit Cards

Just like an online personal loan, a Credit Card is an instrument of an unsecured loan. They fall into the unsecured credit category because of no requirement of a collateral or mortgage to avail these. You can avail of a credit card based on your creditworthiness, alone. Your income and repayment history play a big role in getting you a Credit Card.

Physically, a credit card is a rectangular piece of plastic that is equipped with a magnetic strip. This magnetic strip, on the back of the card, houses your registered account information with the card issuing company. Your name and credit card number, on the front, act as the identifiers. Swiping the card allows the magnetic strip on your card to identify your credit account and process the payment at POS terminals. The card details also help you pay for online purchases.

Your credit score, and monthly income, determine if you are worthy to avail a new Credit Card. A revolving account is created by the card issuing company, granting you a line of credit. You are assigned a credit card limit, which is an upper limit set by the card company, for you to spend on credit. You can later pay back the amount spent, during a fixed tenure, along with interest and charges. The credit card also contains an RFID chip that protects your card against identity theft.

When you use your credit card to make payments, the merchant’s bank validates your credit account and asks your card issuing bank if the payment can be processed. If all goes well, your purchase is added to your credit account. Merchants pay fees to credit card companies – to accept credit cards at their end; and credit issuing companies (or banks) receive the merchant fee as revenue. All these expenses and purchases are recorded by the card issuing authority, and sent to you in the form of a bill.

A billing cycle is a period preset, within which all purchases and payments are accounted for and billed. It is usually set for 30 days. A grace period of 15-25 days is added to the total number of days of the billing cycle. If the previous month’s balance payment is made before the end of the grace period, no charges are incurred by the cardholder. In case, if the card holder fails to pay the total outstanding amount by the due-date, a minimum balance has to be paid to the credit card company. This amount is usually 5% of the total balance. One thing to be careful about while using a credit card is Credit Card fraud/theft. Digital fraud is a common issue in today’s world. Yesterday, we read about Uber concealing a hack that occurred more than a year ago wherein the personal information of close to 57 million Uber users was compromised. That is why it is hugely important to be aware of credit card fraud. So, be careful of skimmers, phishers and also while using your credit card.


Micro ATMs

A Micro ATM is a device that is used by Business Correspondents (small shop/kiosk owners) to deliver basic banking services. This platform enables Business Correspondents to conduct instant transactions. These act as mini branches for banks across India. You can deposit, or withdraw, cash regardless of the bank being associated with a particular BC. A user has to simply authenticate and then transact. The money withdrawn comes from the BC directly.



AEPS aka Aadhaar Enabled Payment System, is a bank led payment model that allows users to make payments at POS (micro ATM) through the Business Correspondent (BC) of a bank; using Aadhaar as authentication. You avail of AEPS by providing your KYC and linking your Aadhaar number to your bank account. To perform a transaction you need to go to a Micro ATM, input your Aadhaar number and bank name. Transactions are not charged to the AEPS user. The limit for fund transfer is independently set by banks.

BHIM Aadhaar Pay

The BHIM Aadhaar Pay is used by merchants to receive digital payments from customer via Aadhaar authentication. This helps the merchant to receive the sale proceeds instantly to the merchant’s own bank account. The merchant must have an Android smartphone with installed BHIM Aadhaar app and a certified biometric scanner which is connected to the smartphone via USB port.


Let us know what you think of the digitization in India.

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