The National Payment Corporation of India officially declared its permissioned blockchain-based platform, ‘Vajra,’ to make the payment process quicker, simpler, and more transparent. 

After thorough research, the NPCI has formed a distributed ledger technology device to render a highly secure, tamper-proof database for various payment procedures. 

The NPCI is a parasol organization for settlement systems and retail payments in India. It is an initiative of the RBI and Indian Banks’ Association under the terms of the Payment and Settlement Systems Act 2007, intended at building a robust payment infrastructure in India. 

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

The Vajra platform 

Vajra is a permissioned blockchain-based platform. Only a certified party under the network administrator can participate in the blockchain network. There will be three kinds of nodes on the platform.

1. Clearing House node: Holds admin rights for this platform and is managed by NPCI. It will give a root-authority-signed TLS certificate from the network’s permissions service to Participant nodes.
2. Notary node: Authenticates a transaction only if the Aadhar biometric is used for validation. It will obtain transactions only from the Clearing House node.
3. Participant node: The banks represent it. These nodes can post, view, and receive transactions.

The Clearing House node has the power to add a new node on the platform. The node will verify each external party associating with the platform participants. The Vajra platform takes care of safety in data access and API interactions with key management and established security procedures.

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

First, when a user starts a transaction on the Vajra app, MicroATM, by online banking, at a point of sale or for e-commerce, the demand for collection, payment, or deposit appears to the server of the issuing bank, payee or payer. Then, using DLT, adapters, or APIs, the bank or nodes get the transactions and document the same on the blockchain platform.

Smart contracts working on the Vajra blockchain verify and trigger transactions based on predefined business rules. The fourth step includes recording transactions on the blockchain upon the successful clearing. 

As per viewing benefits, the Clearing House and Participant nodes view the transaction information entered on DLT. Eventually, every 15 minutes, the NPCI devises clearing files and fees from the DLT and posts it to the RBI for settlement processing.

Advantages of Vajra

The Vajra attempts to secure zero or minimal processing time for reconciliation and quicker dispute resolution while executing cryptography to enhance the security of payment transactions.

Manually processing payments has a significant risk of failure while also taking a long time to process. Significant benefits of the Vajra platform are time sensitivity, transparency, data security, fast processing, and sturdy dispute mechanism. 

An agency, Crypto Head, a technology knowledge provider has also appreciated the move.

Sumit Gupta, co-founder, and CEO of Indian crypto platform CoinDCX, stated that this is an excellent step by the NPCI, as India could become a model to the rest of the world by adopting the online payments ecosystem, further stating that:

“Starting this journey on a permissioned blockchain makes eminent sense to test the network operations of different types of nodes and the transactional activities conducted by the customers. At the time when China, Uruguay, Turkey, Thailand, Sweden, France, etc. are have already started working on their pilot projects to bring their own Center Backed Digital Currencies (CBDCs), NPCI coming up with an entire payments platform which is secure, tamper-evident, and versatile is exemplary.”

When payment-related conflicts are concerned, possible arguments may comprise technical errors, failing to process a transaction on a professional basis, or even failing to conduct business. Vajra administers all these problems in real-time data and solves the intermediary problem. 

Presently, the clearing and settlement process includes various irrelevant parties transacting with each other, which needs some level of mediation from a centralized administrator.

Data on a blockchain gets recorded in a block on the public ledger, which indicates that each participant has a model of the entire chain. So, what transformations are to be done from the banks for proof-of-concept? Concerning this, the NPCI stated: 

“No changes are required from the Bank infrastructure. The banks have to whitelist the Vajra adaptor IPs and ports. Banks have to generate the transaction for the corresponding banks, which are part of the POC.”

The NPCI’s creation of a permissioned blockchain platform is regarded as a positive step by the Indian fintech industry.