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2. Introduction

2.1 Nepal Clearing House Limited (NCHL)​

The Nepal Clearing House Limited (hereinafter referred to as ‘NCHL’) is a public limited company established under the leadership of Nepal Rastra Bank (the Central bank of Nepal), banks & financial institutions with an objective of establishing national electronic payment, clearing and settlement systems in Nepal. NCHL has successfully implemented electronic image-based cheque clearing (NCHL-ECC) system; interbank payment system (NCHL-IPS) as automated clearing house; connectIPS system as faster payment system; National payments interface (NPI) as consolidated APIs for payment initiation/ process; and connectRTGS as integration for RTGS transaction initiation. And all the systems are implemented on (T+0) settlement basis and has participation of over 65 banks & financial institutions (BFIs) as direct members and over 30 institutions as indirect/ technical members.

2.2 NEPALPAY Card​

National Payment Switch (NPS) is the interoperable national switch for routing and settlement of domestic transactions. The objectives of NPS are to establish interoperable switch for card transactions, introduce national payments scheme for domestic cards and upgrade the retail payment switch/ system to enhance interoperability of non-card retail transactions. Nepal Rastra Bank (NRB) has mandated NCHL to establish additional infrastructure for the establishment and operation of National Payment Switch (NPS) that includes interoperability of card- based transactions (hereinafter referred to as “NPS National Card Switch” or “NPS-NCS” or “NCS”); rollout domestic card scheme for Nepal (hereinafter referred to as “NEPALPAY Card”); and scale-up of the existing payment systems/ platforms to enable non-card based interoperability (hereinafter referred to a ‘non-card Retail System” or “NPS-NPI”). These will together be referred as “National Payment Switch” or “NPS”. The scope of the national card scheme under NPS is to introduce Nepal’s own domestic card scheme (NEPALPAY) and operated by NCHL through NPS card switch with issuing and acquiring of the domestic card being done by the participating member BFIs or payment processors. The domestic card scheme is a standard chip based EMV compliant scheme (in accordance with relevant ISO standards) which supports multi-interfaces (contact, contactless and virtual cards) and multi-purpose payment cards (Debit, Pre-paid and Credit of different variants) and non-payment cards (Parking, Loyalty, Membership etc.).

2.3 Objectives of NEPALPAY Card​

National Card Scheme in Nepal creating a common platform of payment cards, such as debit, prepaid, credit and virtual cards. Banks and financial institutions can issue NEPALPAY card (Domestic and International) Co-branding with Discover card scheme. Domestic transactions will be routed through National Card Switch (NCS).

Following are the main objectives of NEPALPAY card:

i) Universal Acceptance of EMV Chip Card;

ii ) Multi-application, multi-function-based contact / contactless Card;

iii ) Consistent & secure payment functions at the point of transaction.

2.4 NEPALPAY IC Card and EMV​

In the chip-based payments industry, the EMV standard defines the interaction between the chip on the card and the chip-enabled terminal. It also allows for global interoperability of chip payment transactions by defining all the basic interactions between a card and a terminal. An EMV terminal needs to support all the possible EMV-defined interactions that an EMV card may require. An EMV card, on the other hand, only needs to support a subset of all the possible EMV standards. When issuing NEPLPAY chip cards, Issuer Members only need to comply with a basic subset. The NEPALPAY IC Card payment application is based on the EMV standard and is totally compatible with EMV at the kernel level (level 1 and level2).

2.5 Legal and Regulatory Framework​

The legal authority of the Specification shall be Nepal Rastra Bank Act 2058 BS (2002) as per the provisions of Section 5, Sub Section 1 (i) and the prevailing Payment & Settlement Act 2075 and Payment & Settlement Bylaw 2077. This Specification shall be the regulatory framework that must be followed by all the concerned parties including NCHL and the Members, which shall be effective from the day of its enrollment. The approvals and regulations already issued by NRB, if any, with regards to the payment card shall also be valid and binding for all the stakeholders. In order to establish interoperability, mitigate risks and monitoring of payment card systems in Nepal, NRB may instruct and mandate the licensed BFIs, PSPs and/or PSOs to utilize all or some of the use cases of NPS-NCS by issuing directive/circulars as required. The NEPALPAY Card, as part of the National Payment Switch (NPS), is implemented and operated by Nepal Clearing House (NCHL) as a clearing house, licensed and regulated by NRB as a Payment System Operator (PSO). Any modification in this Specification shall be amended as per the recommendation of NCHL and upon approval by NRB. The participating members and other relevant stakeholders shall be notified accordingly by NCHL.