India's Payments Platform Vajra Gets the Blockchain Ball Rolling

While the Indian government is uncertain about the use of cryptocurrency, the National Payment Corporation of India, or NPCI, officially announced its permissioned blockchain-based platform, Vajra, to make the payment process easier, faster and more transparent. 

After detailed research, the NPCI has developed a distributed ledger technology mechanism to provide a highly secure, tamper-proof database for various payment procedures. 

The NPCI is an umbrella organization for retail payments and settlement systems in India. It is an initiative of the Reserve Bank of India and Indian Banks’ Association under the provisions of the Payment and Settlement Systems Act 2007, aimed at creating a robust payments infrastructure in India. 

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The NPCI aims to become “the best payment network globally.” Currently, 56 banks are shareholders of the NPCI, which is supported by 10 banks: State Bank of India, Punjab National Bank, Canara Bank, Bank of Baroda, Union Bank of India, Bank of India, ICICI Bank, HDFC Bank, Citibank and HSBC.

The Vajra platform 

Vajra is a permissioned blockchain-based platform. Only a registered party under the network administrator can be part of the blockchain network. There will be three types of nodes on the platform.

  1. Clearing House node: Possesses admin rights for this platform and is maintained by NPCI. It will provide a root-authority-signed TLS certificate from the network’s permissions service to Participant nodes.

  2. Notary node: Validates a transaction only if the Aadhar biometric is used for authentication. It will receive transactions only from the Clearing House node.

  3. Participant node: Represented by the banks. These nodes can post, receive and view transactions.

The Clearing House node holds the right to add a new node on the platform. Each external party interacting with the platform participants will be authenticated by the node. The Vajra platform takes care of security in data access and API interactions with key management and defined security procedures.

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How it works

Bank nodes receive requests from APIs and process them through Vajra. The system has self-executing contracts containing business rules in the form of smart contracts. After successfully processing the request, the on-chain data will be added to the ledger. The NPCI explains it in five simple steps:

First, when a user initiates a transaction on the Varja app, MicroATM, through online banking, at a point of sale or through e-commerce, the request for payment, collection or deposit comes to the server of the issuing bank, payer or payee. Then, using DLT, APIs or adapters, the bank or nodes receive the transactions and record the same on the blockchain platform.

Smart contracts running on the Varja blockchain validate and trigger transactions based on predefined business rules. The fourth step involves recording transactions (debit and credit) on the blockchain upon successful clearing. As per viewing rights, the Clearing House and Participant nodes see the transaction information recorded on DLT. Finally, every 15 minutes, the NPCI creates clearing files and fees from the DLT and posts it to the Reserve Bank of India for settlement processing.

Benefits of Vajra

The Vajra platform seeks to ensure zero or minimal processing time for reconcilia