Question map
Which one of the following links all the ATMs in India ?
Explanation
The National Payments Corporation of India (NPCI) is responsible for linking ATMs across India[1], though some other operators are also involved. NPCI was set up in December 2008 as an umbrella organization for retail payment systems in India with the guidance and support of the RBI and the Indian Banks' Association (IBA)[2]. NPCI operates as a retail payment system and is a non-bank payment system operator authorized by RBI under the PSS Act 2007[3].
While the Indian Banks' Association (IBA) did set up "Swadhan" in 1997, which was the first network of shared ATMs in India[4], the current nationwide linking of all ATMs is handled by NPCI. The RBI acts as the regulator and authorizes payment system operators but does not directly link ATMs. NSDL is a depository for securities and is not involved in ATM operations. Therefore, option C (NPCI) is the correct answer.
Sources- [1] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 10.Oversight of payment and settlement systems > p. 71
- [2] https://fastpayments.worldbank.org/sites/default/files/2021-10/World_Bank_FPS_India_IMPS_and_UPI_Case_Study.pdf
- [3] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 10.Oversight of payment and settlement systems > p. 70
- [4] https://icrier.org/pdf/Role_of_ATMs_in_Financial_Inclusion.pdf
PROVENANCE & STUDY PATTERN
Full viewThis is a classic 'Institutional Function' question, easily solvable from standard Economy texts (Vivek Singh/Singhania). The core strategy is distinguishing between the 'Regulator' (RBI) and the 'Infrastructure Operator' (NPCI). If you studied Digital Payments, this was a free hit.
This question can be broken into the following sub-statements. Tap a statement sentence to jump into its detailed analysis.
- Statement 1: Does the Indian Banks' Association (IBA) link all ATMs in India?
- Statement 2: Does the National Securities Depository Limited (NSDL) link all ATMs in India?
- Statement 3: Does the National Payments Corporation of India (NPCI) link all ATMs in India?
- Statement 4: Does the Reserve Bank of India (RBI) link all ATMs in India?
- States IBA set up the first shared ATM network (Swadhan) in 1997, implying a role in creating a network but not that it links all ATMs.
- Describes Swadhan as the "first network of shared ATMs", which suggests other arrangements/models exist beyond IBA's initiative.
- Identifies NPCI as the umbrella organisation for retail payment systems (set up with guidance and support of the RBI and IBA), indicating responsibility for national-level payment infrastructure rather than IBA itself.
- Implies the IBA played a supporting/guiding role in creating NPCI, rather than being the single entity that links all ATMs.
States NPCI was created as an initiative of RBI and the Indian Banks' Association to operate retail payments and settlement systems in India.
A student could infer IBA is a central actor in payments infrastructure and check whether NPCI (or IBA) operates a single nationwide ATM-switch or shares that role with others.
Lists 'Linking of ATMs across India' as a service and notes 'some other operators are also involved'.
Combine this with the fact IBA helped form NPCI to suspect ATM linking is multi-operator rather than solely IBA-run, and then verify operators/providers of ATM switching.
Explains WLAs and brown-label ATMs where connectivity to banking networks is provided by sponsor banks or service providers.
Use this to reason that multiple sponsors/service providers handle ATM connectivity, so a single IBA link for all ATMs is less likely; one could map providers and sponsoring banks to test coverage.
Says a bank's ATM card can be used at any ATM/WLA in the country, indicating nationwide interconnectivity exists.
A student could combine this with evidence of multiple operators to ask whether that interconnectivity is achieved via a single IBA-run network or via interoperable networks (e.g., NPCI/other switches).
Defines NSDL as one of two depositories created by the Depository Act (1996) that operate via Depository Participants to maintain demat accounts.
A student could note NSDL's described role in securities custody/clearing and contrast it with organisations responsible for payment/ATM networks to judge whether NSDL would plausibly manage ATMs.
Lists 'Linking of ATMs across India' alongside NPCI-related systems and notes NPCI's ownership by public sector banks.
A student could infer that ATM linking is a function associated with NPCI (or similar payment operators) rather than with a securities depository like NSDL, and check external sources about NPCI/NFS.
States the Reserve Bank authorises payment system operators and names National Payments Corporation of India and systems like 'National Financial Switch' and IMPS.
A student could extend this to reason that ATM network linking is overseen by payment-system operators authorised by RBI (e.g., NPCI/NFS), not by securities depositories such as NSDL.
Explains ATM interoperability: a particular bank's ATM card can be used at any ATM/WLA in the country.
A student could connect this interoperability to the existence of a nationwide ATM-switch/network (which other snippets attribute to NPCI/NFS) rather than to NSDL.
Describes WLAs and brown-label ATMs where connectivity to banking networks is provided by sponsor banks or service providers.
A student could use this to infer that ATM connectivity is handled by banking/payment network arrangements and service providers — a different domain from securities depositories like NSDL.
- Explicitly lists 'Linking of ATMs across India' as an NPCI function.
- Adds parenthetical note that 'some other operators are also involved', implying NPCI is not the sole operator.
- States NPCI is authorized by RBI to operate retail payment systems including the 'National Financial Switch'.
- National Financial Switch is the primary ATM switching/network service, linking ATMs — supporting NPCI's role in ATM linkage.
- Describes brown‑label/WLA models where connectivity and cash management are provided by sponsor banks or service providers.
- Indicates alternative operators/arrangements exist for ATM connectivity, supporting the view that NPCI does not exclusively link all ATMs.
States that a particular bank's ATM card can be used at any ATM/WLA in the country, implying nationwide interoperability of ATM networks.
A student could use this to ask which organisation/operator provides that interoperability (e.g., bank consortia or a national switch) and whether RBI directly operates or only regulates that arrangement.
Explains that RBI is the driver in development of national payment systems and that payment systems require RBI authorisation under the PSS Act.
A student could extend this by checking whether ATM networks are classified as payment systems that need RBI authorisation and if authorisation implies RBI links/operates them or only supervises them.
Notes RBI acts as a common banker enabling settlement of interbank transfers, indicating RBI has infrastructure/role in interbank settlement which underpins payment-network interoperability.
A student could use this to investigate whether ATM transaction settlement runs through RBI-operated settlement systems or via private/industry switches settled through RBI accounts.
Says RBI prescribes prudential norms and regulates banks' operations, showing RBI's regulatory control over banks that operate ATMs.
A student could combine this with the fact of bank-operated ATMs to ask if RBI's regulatory role extends to directly linking physical ATM networks or to setting rules for third-party operators.
- [THE VERDICT]: Sitter. Direct hit from the 'Banking & Payment Systems' chapter in standard books (e.g., Vivek Singh, Nitin Singhania).
- [THE CONCEPTUAL TRIGGER]: The 'Digital Payments' boom post-2016. UPSC focuses heavily on the backend infrastructure (NPCI, UPI, BBPS) enabling the frontend revolution.
- [THE HORIZONTAL EXPANSION]: Map the full NPCI product suite: UPI, IMPS, RuPay, NACH, AEPS, FASTag, and CTS (Cheque Truncation System). Contrast these with RBI-operated systems (RTGS, NEFT). Know that NPCI is a 'Not-for-Profit' company owned by a consortium of banks, not directly by the Govt.
- [THE STRATEGIC METACOGNITION]: When studying a sector (Banking/Capital Markets), always identify the 'Plumbers'—the bodies that run the actual networks (NPCI for payments, NSDL/CDSL for shares, CCIL for clearing) versus the 'Police' (RBI/SEBI).
NPCI is described as an umbrella organisation created jointly by RBI and IBA to operate retail payment and settlement systems.
High-yield for UPSC: knowing NPCI's origin and mandate explains who builds nationwide payment rails and clarifies institutional roles in India's payment ecosystem. Connects to questions on digital payments, payment system governance, and public–private coordination. Useful for answering 'who does what' and policy-design questions.
- Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 7: Money and Banking > National Payments Corporation of India > p. 192
References note 'linking of ATMs across India' and that 'some other operators are also involved', implying ATM linkage involves multiple entities.
Important for UPSC to distinguish interoperability (cards usable across ATMs) from single-entity ownership/control. This helps answer questions on infrastructure ownership, competition, and regulatory roles (RBI/NPCI/IBA). Practice comparing institutional responsibilities and network participation in financial systems.
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 10.Oversight of payment and settlement systems > p. 71
- Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 7: Money and Banking > Automated Teller Machine > p. 195
Evidence shows IBA was an initiator of NPCI alongside RBI, but other operators are involved in ATM linkage.
Clarifies that IBA is a stakeholder/co-creator rather than an automatic sole implementer of nationwide ATM linkage — a nuance often tested in governance and institutional-function questions. Helps frame answers on multi-stakeholder governance and the limits of industry associations.
- Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 7: Money and Banking > National Payments Corporation of India > p. 192
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 10.Oversight of payment and settlement systems > p. 71
Reference [1] identifies NSDL as one of two depositories in India that maintain demat accounts and operate via depository participants.
High-yield for UPSC: understanding NSDL/CDSL clarifies the institutional architecture of capital markets, links to topics on dematerialisation, SEBI regulation and investor protection. Questions often ask to distinguish market infrastructure entities and their regulatory oversight; mastering this concept helps answer such linkage/role-based prompts.
- Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 9: Agriculture > IMPORTANT TERMS RELATED TO STOCK MARKET > p. 277
References [2] and [7] explicitly mention 'Linking of ATMs across India' and list NPCI/National Financial Switch as the retail payment operator involved.
High-yield for UPSC: payments infrastructure (NPCI, NFS, UPI, IMPS) is central to modern banking topics and questions on financial inclusion/digital payments. Knowing which agency handles ATM switching vs. other payment rails prevents confusion in policy or institutional identification questions.
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 10.Oversight of payment and settlement systems > p. 71
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 10.Oversight of payment and settlement systems > p. 70
Evidence shows NSDL is a securities depository ([1]) while NPCI/NFS handle ATM linking and retail payment systems ([2], [7]); they are separate institutional roles.
High-yield: many UPSC questions test candidates' ability to correctly map functions to institutions (e.g., who manages depositories vs. who runs payment networks). Mastery reduces errors in governance/finance questions and aids integrated answers on financial architecture and regulation.
- Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 9: Agriculture > IMPORTANT TERMS RELATED TO STOCK MARKET > p. 277
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 10.Oversight of payment and settlement systems > p. 71
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 10.Oversight of payment and settlement systems > p. 70
Several references identify NPCI as the authorized non‑bank operator for retail payment systems (UPI, RuPay, NFS), showing its central role in payment infrastructure.
High‑yield for UPSC: questions often ask about institutional roles in payment systems and financial inclusion. Understanding NPCI's mandate links to RBI regulation, card schemes, and digital payments topics — useful for static and contemporary policy questions.
- Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 7: Money and Banking > National Payments Corporation of India > p. 192
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 10.Oversight of payment and settlement systems > p. 70
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 10.Oversight of payment and settlement systems > p. 71
The 'National Financial Switch' (NFS) is the specific network linking ATMs, originally set up by IDRBT and later taken over by NPCI. A future question might ask about the 'Payment and Settlement Systems Act, 2007' (the legal backing) or the ownership structure of NPCI (it is NOT a PSU, but an initiative of RBI & IBA).
Use 'Name-Function' Logic:
1. NSDL has 'Securities' in its name -> Stock Market (Eliminate).
2. IBA is an 'Association' -> A lobby/union group, they don't run technical server farms (Eliminate).
3. RBI is the 'Regulator' -> They sit in the ivory tower making rules; they rarely operate retail-level switches (too much volume).
4. NPCI ('Corporation') implies an operational entity -> Best fit.
Mains GS-3 (Financial Inclusion): ATM interoperability is a critical component of 'Last Mile Connectivity.' Linking ATMs allows a migrant worker with a SBI card to withdraw cash from a PNB machine in a remote village, directly supporting the Jan Dhan-Aadhaar-Mobile (JAM) trinity goals.