How the National Payment Switch Works: A Simple Breakdown

You're at a teashop in Asan, Kathmandu. The shopkeeper has one QR standee. You open your Khalti wallet. Your friend behind you opens her bank's mobile app. Both of you scan the same code and both payments land in the shopkeeper's account — instantly, at zero extra cost. A few years ago, that sentence was technically impossible in Nepal. Different payment networks didn't talk to each other. Today it works, and the reason it works has a name: the National Payment Switch.

What Is the National Payment Switch?

The National Payment Switch (NPS) is the central switching and settlement infrastructure for retail payments in Nepal, operated by Nepal Clearing House Limited (NCHL) under a mandate from Nepal Rastra Bank (NRB). Think of it as the invisible highway underneath every digital payment in Nepal — when you pay a merchant using your bank's app, or transfer money between two different wallets, the NPS is the layer that routes the transaction, confirms authorization, and settles the funds between institutions.

Built on open Application Programming Interfaces (APIs), the NPS is accessible to all payment ecosystem participants on a non-discriminatory and low-cost basis. It isn't owned by any one bank or wallet company. It's national infrastructure — like a road network that any licensed vehicle can use.

Before NPS: The Fragmented, Walled-Garden Problem

To understand why the NPS matters, you have to picture Nepal's payment landscape before interoperability was enforced. Nepal Rastra Bank began issuing licenses to Payment Service Operators (PSOs) and Payment Service Providers (PSPs) from 2016. That licensing boom was positive for competition — it spawned eSewa, Khalti, IME Pay, Fonepay, connectIPS, and more — but it created a fragmented ecosystem where each network built its own closed-loop infrastructure. Each scheme had its own QR code. Each wallet could only pay merchants in its own network. Merchants were stuck displaying three, four, or five different QR standees at their counters, one for each payment provider.

For users, this meant your Khalti wallet couldn't pay a merchant whose terminal only accepted Fonepay. For merchants, it meant maintaining relationships and hardware for multiple payment systems. For the broader economy, it meant that competition drove fragmentation rather than inclusion. The NPS was built specifically to fix this — to make every network talk to every other network through one shared, neutral routing layer.

After NPS: How Banks, Wallets, and Merchants Now Connect

The NPS works in two major layers. The Retail Payment Switch (RPS) handles non-card-based retail transactions — QR payments, wallet-to-wallet transfers, mobile banking payments, and bill settlements. The National Card Switch (NCS) handles card-based transactions, routing payments made with debit and credit cards across different banks and ATM/POS networks, including the domestic NEPALPAY card scheme.

The NEPALPAY QR scheme, implemented by NCHL as part of the NPS mandate, is particularly visible for everyday users: it establishes a single, interoperable QR standard that every licensed payment network in Nepal can read and process. NCHL and SmartChoice Technologies Limited (SCTL) are already interoperable through the NPS, with more networks in the process of integration. As full interoperability is achieved, the need for multiple QR standees at merchants will be eliminated entirely — a single QR code will accept payment from any licensed wallet or bank in Nepal.

Real-World Example: Paying With QR Across Different Providers

Here's how the NPS works in a concrete scenario that's increasingly common across Nepal's growing QR-enabled merchant base:

1. A customer opens their bank's mobile banking app and scans the merchant's NEPALPAY QR code.
2. The payment request is sent to the customer's bank, which passes it to the NPS (via RPS) for routing.
3. The NPS identifies the merchant's acquiring network, validates the transaction, and forwards authorization between the customer's bank and the merchant's payment scheme.
4. Funds are settled through the Retail Payment Switch, with final settlement processed through the RTGS system for interbank settlement.
5. The merchant's terminal confirms payment — instantly — regardless of whether the customer used Khalti, Fonepay, a bank app, or connectIPS.

From the user's perspective: you scanned a QR code and it worked. From the infrastructure's perspective: the NPS performed real-time routing, authorization, clearing, and settlement between multiple institutions in a fraction of a second.

The Role of NRB in Overseeing the NPS

Nepal Rastra Bank is not just a passive observer of the NPS — it is the architect of the entire system. NRB mandated NCHL to establish and operate the national QR scheme and the internetwork transaction and settlement infrastructure. NRB also issued an interoperability directive requiring all licensed payment schemes to work toward connecting through the NPS — a policy decision that made interoperability a legal obligation rather than a voluntary choice.

Under NRB's Payment Systems Development Strategy and the Retail Payment Strategy 2019, the central bank has consistently pushed toward a future where Nepal has a unified, secure, and interoperable retail payment system with a common QR standee design suggested by NRB itself. The NPS is the technical execution of that policy vision. As of mid-2024, 35 institutions were licensed as payment institutions under NRB's Payment Systems Department (26 PSPs and 9 PSOs), all subject to the interoperability framework anchored by the NPS.

Cross-Border Extension: The UPI-NPI Link Goes Live

The most significant recent development in Nepal's payment infrastructure is the live launch of the UPI-NPI cross-border remittance corridor — operationalized on June 6, 2026, through a collaboration between NPCI International Payments Limited (NIPL), India's NPCI's overseas arm, and Nepal Clearing House Limited (NCHL).

The National Payments Interface (NPI) — Nepal's consolidated open-API payment infrastructure, built by NCHL and sitting above the NPS — became the bridge point for this integration. Here's what it enables:

• Real-time peer-to-peer remittances between India and Nepal using mobile banking apps and digital wallets, without relying on traditional banking channels with their associated delays and fees
• Instant settlement at lower cost compared to conventional remittance services — a meaningful gain for the millions of Nepali workers in India sending money home
• Cross-border transaction flows that are routed through the NPIx (NPI cross-border) layer for validation, currency conversion, and business workflow processing before settling through the domestic RTGS system
• P2P transfers up to INR 15,000 per day and INR 100,000 per month, consistent with NRB's foreign exchange management guidelines

The QR side of this cross-border integration had already quietly launched earlier: since February 28, 2024, merchants within Fonepay's QR network have been accepting UPI payments from Indian tourists and visitors, enabling seamless payments at over 1.5 million merchant outlets in Nepal. Twenty BFIs within Fonepay's network can now allow their customers to scan UPI QR codes in India to make merchant payments. The June 2026 launch of the full UPI-NPI P2P corridor extends this further, turning QR merchant acceptance into full cross-border person-to-person remittance.

Nepal now joins a network of nine countries — alongside Singapore, UAE, France, Mauritius, Bhutan, Qatar, Sri Lanka, and Cambodia — where India's UPI is live for cross-border payments.

What This Means for the Average User

Most people will never think about the National Payment Switch — it operates invisibly, exactly as intended. But its existence quietly removes real friction from everyday financial life in Nepal:

• You don't need to carry multiple wallets to pay at different merchants. One QR standard means one scan works everywhere, regardless of which payment provider the merchant or you prefer.
• Sending money between banks no longer requires both parties to use the same institution. The NPS routes interbank transfers through a neutral infrastructure layer, settling in real time rather than the next business day.
• Indian tourists can now pay at Nepali shops using the UPI apps already on their phones, without needing Nepali cash or a separate digital wallet.
• Nepali workers in India can send money home in real time through their mobile banking app, at lower cost than traditional remittance corridors.
• Small merchants no longer need to display a different QR standee for every payment provider, reducing complexity and encouraging more small businesses to accept digital payments.

The broader effect is a payment ecosystem that feels simple from the outside precisely because the complexity has been absorbed into a shared, interoperable infrastructure layer underneath — which is exactly what well-designed public payment infrastructure is supposed to do.

Frequently Asked Questions

What is the National Payment Switch in Nepal?

The National Payment Switch (NPS) is Nepal's central retail payment routing and settlement infrastructure, operated by Nepal Clearing House Limited (NCHL) under a mandate from Nepal Rastra Bank. It enables interoperability between all licensed payment networks — banks, wallets, and card schemes — so that money can flow between any two participants regardless of which network they're on.

Who operates the NPS and who oversees it?

NCHL (Nepal Clearing House Limited), a public limited company promoted by Nepal Rastra Bank, operates the NPS. NRB mandated NCHL to build and run this infrastructure, and NRB's Payment Systems Department continues to provide regulatory oversight, policy direction, and interoperability directives that govern how all licensed payment institutions must participate.

What is the UPI-NPI link and when did it go live?

The UPI-NPI cross-border payment corridor directly connects India's Unified Payments Interface (UPI) with Nepal's National Payments Interface (NPI), enabling real-time, low-cost peer-to-peer remittances between the two countries. It went live on June 6, 2026, through a partnership between NPCI International Payments Limited and NCHL.

Can I already use my Indian UPI app to pay in Nepal?

Yes — UPI merchant payments at Fonepay-network merchants in Nepal have been live since February 2024. The June 2026 launch extended this to real-time P2P remittances, meaning Indian users can now also send money directly to Nepali individuals, not just pay at merchant terminals.

What is the difference between NPS and NPI?

The NPS is the core switching infrastructure — the routing and settlement engine for retail transactions. The NPI (National Payments Interface) sits above it as a consolidated open-API layer that aggregates multiple NCHL payment systems, enabling third parties and international networks like India's UPI to connect to Nepal's payment infrastructure through a standardized interface.