How did India move from hundis to UPI payments? Why do banks need clearing and settlement? And what makes UPI fundamentally different from RTGS, NEFT and IMPS?

In this episode of Banking Reframed, Srikumar Nair speaks with veteran banker Mr. A. P. Raja to trace the fascinating evolution of India’s payment systems—from medieval trade and indigenous banking arrangements to cheques, clearing houses, electronic fund transfers and the UPI revolution.

Mr. Raja began his banking career in the State Bank Group in 1979 and worked across branch banking, treasury, foreign exchange, SWIFT, MIS and banking technology. He worked as a project consultant on the Structured Financial Messaging System—SFMS, the secure messaging infrastructure used by RTGS and NEFT. He was also involved in the development of IFSC.

✅ How did hundis help traders avoid carrying money across long distances?

✅ Why are goldsmiths considered precursors to modern banks?

✅ What is settlement risk, and why does it worry central banks?

✅ What is the difference between gross settlement and net settlement?

✅ How did the Madhavpura–Ketan Parekh episode accelerate the push for RTGS?

✅ Why was IMPS introduced for instant retail payments?

✅ What is novation, and how does it reduce settlement risk in IMPS and UPI?

✅ Why did UPI achieve far greater adoption and impact than IMPS?

✅ Is IFSC still relevant in today’s payment environment?

The episode also explains why UPI is not merely another payment application. It is an interoperable payment ecosystem that allows banks, fintech companies and payment service providers to innovate while operating on a common, secure infrastructure.

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This discussion will be especially useful for:

• Bankers and BFSI professionals, including Fintech

• Students and job seekers

• Anyone interested in understanding how India’s digital payment ecosystem really works

#UPI #DigitalPayments #Banking #BankingReframed #BankingPodcast #bankinginsights

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Timestamps:

00:00 Episode highlights

02:37 India’s payment journey: From Hundi to UPI

03:30 Meet the guest: Mr. A. P. Raja

04:56 How hundis enabled safer long-distance trade

08:05 Bills of exchange, endorsements and allonge

10:14 How goldsmiths became early custodians of money

11:10 How cheques came into existence

14:04 Why clearing and settlement became necessary

15:07 How manual cheque clearing worked

18:28 Cheque truncation or image-based presentation?

19:26 Understanding settlement risk

20:18 How one bank failure can trigger a domino effect

23:57 Why India needed RTGS

24:16 The three defining features of RTGS

25:29 Gross settlement versus net settlement

29:15 The Ketan Parekh–Madhavpura Co-operative Bank episode and the push for RTGS

33:53 Moral hazard and the importance of maker-checker controls

34:50 Why RTGS has a minimum transaction value

36:24 How NEFT batch settlement works

37:30 Why NEFT could not meet the need for instant retail payments

38:28 How IMPS and UPI manage settlement risk

39:08 Novation and NPCI’s settlement guarantee mechanism

41:22 The innovations enabled by UPI

42:04 How third-party payment apps transformed the customer experience

44:23 Push and pull payments in UPI

44:53 How QR codes and soundboxes revolutionised payments

45:45 How UPI achieved mass adoption

47:29 Why IFSC was created

50:43 Is IFSC still relevant today?

51:49 How UPI simplifies bank-to-bank payments

53:38 IMPS as the foundation and UPI as the complete ecosystem

54:42 UPI interoperability versus closed payment apps

55:21 Can UPI remain free and financially sustainable?

57:00 Key takeaways