Indian Central Bank Promoted Payments Corridor Announces New Blockchain Settlement System
The National Payments Corridor of India (NPCI), set up the Reserve Bank of India in 2008, issued a public document to outline the architecture of their new permissioned blockchain, Vajra, that allows for faster and more efficient settlement. According to the document, the use of distributed ledger technology has been introduced to the Indian payments sector in order to automate backend work and improve transparency between clearing agencies, banks, and other Payment System Players (PSPs), December 27, 2019.
India Brings Blockchain to Retail Payments
Vajra, which is a Sanskrit word for both lightning and diamond, is in the process of being rolled out for the Unified Payments Interface (UPI) that has taken India by storm. The introduction of UPI brought forth a new level of efficiency to retail payments in India, with no fee and finality in seconds. UPI can also be used from mobile wallets like Google Pay and PayTM, as it now encompasses almost half of the country’s digital transactions.
There are three different types of nodes that operate on Vajra: clearinghouse nodes run by NPCI, participant nodes run by banks and PSPs, and notary nodes run by the UIDAI, which runs the Indian Adhaar identification system (Indian equivalent of a social security card). Each of these nodes is given a different clearance by the system. NPCI and UIDAI nodes can see the entire ledger, while participant nodes can only see transactions they are a part of.
On-chain finality includes only important details regarding transactions, required to guarantee finality, while each participant node will also have their own off-chain ledger to store ancillary data.
What Vajra Promises the Indian Market
Transparency between nodes on the network, automated settlement, and a more reliable reconciliation of the ledger promise Indian financial institutions lower costs with better results for end-users.
By using hashing algorithms to secure data on the network, transaction privacy is enforced at a fundamental level so that other banks and malicious third parties cannot access a customer’s transaction history.
Finally, because of the distributed nature of the system and DLT‘s core premise of bringing more reliable transaction management, disputes can be tracked and solved in a quicker, more effective manner.