On 17th January, 2022, while addressing the ‘State of the World’ at the World Economic Forum’s (WEF) Davos Agenda conference remotely, Prime Minister Narendra Modi has said –“India is moving forward with the principle of “Make in India, Make for World”, fostering self-reliance across sectors”. PM Modi said that India will continue with its reforms to enable its vision of sustainable economic growth.
“Make in India, Make for World” is a multidimensional, multi-product, multi-services phenomenon. But one particular service deserves special mention.
The National Payments Corporation of India (NPCI) has announced that the neighbouring country of Nepal will be the first foreign country to adopt India’s UPI system, paving the way for transforming the digital economy of the country.
NPCI International Payments (NIPL) is the global arm of National Payments Corporation of India. NIPL will help enable the Unified Payments Interface (UPI) platform in Nepal. NIPL has partnered Gateway Payments Service (GPS), an authorised payment system operator in Nepal, and Bengaluru-based Manam Infotech.
UPI will be deployed in Nepal as a digital public benefit to bolster interoperable real-time person-to-person (P2P) and to-merchant (P2M) payment transactions.
UPI, as a payments platform will enable an open interoperable system for real-time payments and enable financial inclusion in Nepal. It will also lay the foundation for real-time cross-border P2P remittances between Nepal and India.
UPI will enable the final stretch of consumers in Nepal to reap the benefits of an open interoperable payments system. UPI will help catalyse the process of financial inclusion in Nepal and will transform the regional economy by creating more opportunities for businesses. It will help modernise Nepal’s digital payment infrastructure and bring the convenience of digital payments to citizens of Nepal.
On the one hand, the state-of-the-art UPI platform is not only well equipped, technological capable and a formidable entity to digitalise almost any economy, it is amongst the most successful real-time payments (RTP) systems globally, providing – simplicity, safety, and security in P2P and P2M transactions in India. The UPI service has created a significant positive impact in India in terms of the country’s digital payment transformation. In 2021, UPI enabled 39 billion financial transactions amounting to commerce worth $940 billion, which is equivalent to approximately 31% of India’s GDP.
On the other hand, Nepal is also well prepared to adopt it. Nepal has a population of around three crore with about 45% banked. Mobile penetration in Nepal is over 135% and 65% of the population is using smartphones.
As a matter of fact, the same UPI is expected to be marked ‘present’ in Singapore soon. According to a RBI press release on 14th September, 2021, the central banks of India and Singapore (The RBI and the Monetary Authority of Singapore) will link their digital payment systems (UPI and PayNow) for “instant, low-cost fund transfers”, aiming to finish the project by July 2022. With Singapore, the UPI payments would become acceptable in nine more countries, namely- Malaysia, Thailand, Philippines, Vietnam, Cambodia, Hong Kong, Taiwan, South Korea, and Japan. Bhutan has already adopted UPI standards for its Quick Response (QR) code.
Similarly, on 20th August, 2021, the NIPL has partnered with UAE-based Mashreq Bank to provide its mobile-based real-time payment system UPI in the gulf nation. This means, with this tie-up, more than 2 million Indians travelling to the UAE will benefit from UPI enabled mobile applications to pay for their purchases in a shop or merchant establishment across the UAE.
This initiative closely aligns with the G20’s financial inclusion priorities of driving faster, cheaper and more transparent cross-border payments. This initiative is also in line with RBI’s vision of reviewing corridors and charges for inbound cross-border remittances outlined in the Payment Systems Vision Document 2019-21.
In its Payment and Settlement Systems in India: Vision Document – 2019-2021, the RBI has said – “The cost of remitting funds is increasingly becoming a key element influencing the size of remittances. High cost of remittance made through formal channels may drive customers to informal channels which are less secure and prone to misuse. India has already taken several measures to liberalise remittance schemes to drive competition and thereby reduce costs. Some of the initiatives include … receipt of foreign inward remittances directly into the bank accounts of beneficiaries under the Money Transfer Service Scheme (MTSS).”