Definition: The National Financial Switch is the largest interconnected network of automated teller machines (ATMs) in India. This system was developed by Institute of development and research in Banking Technology (IDRBT), Hyderabad.
The national financial switch enabled the interconnectivity between the bank’s switches such that the transactions made at any ATM could be routed to the connected banks. This was done with a view to connecting all the ATMs in the country and facilitate easy banking for the common man residing anywhere in the country.
IRDT is the pioneer of ATM switching service and to keep up with its further research and development activities; it handed over the national financial switch to the National Payments Corporation of India (NPCI). NPCI is the principal institute which looks, after all, retail payment systems in the country.
The NPCI has allowed any bank offering the core banking services round the clock with or without ATM can be a part of this national financial switch through a sponsor bank. The objective behind such a move is to enable the non-scheduled cooperative banks and other regional rural banks to access the wide network of ATMs in the country. Thereby, enabling the customers of such bank to access banking services through any ATM of a connected bank.