The Reserve Bank of India (RBI) and Nepal Rastra Bank (NRB) have taken a major step towards enhancing financial connectivity between the two neighbouring countries. On February 15, 2024, the central banks of India and Nepal signed and exchanged the Terms of Reference for the integration of their fast payment systems, namely, the Unified Payments Interface (UPI) of India and the National Payments Interface (NPI) of Nepal.
What is UPI-NPI linkage?
UPI-NPI linkage is a project that aims to enable users of UPI and NPI to make instant, low-cost fund transfers across the border. UPI is a mobile-based payment system that allows users to send and receive money using a virtual payment address (VPA) or a QR code. NPI is a similar system that was launched in Nepal in 2023, with the support of the Asian Development Bank (ADB) .
Why is UPI-NPI linkage important?
UPI-NPI linkage is expected to bring several benefits for both India and Nepal. According to the RBI, the integration of UPI and NPI will facilitate cross-border remittances between the two countries, which are estimated to be around $2.5 billion per year . The UPI-NPI linkage will also promote financial inclusion, efficiency, and innovation in the region. Moreover, the UPI-NPI linkage will strengthen the historical, cultural, and economic ties between India and Nepal, which share an open border of over 1,800 km .
What are the next steps for UPI-NPI linkage?
Based on the Terms of Reference exchanged between RBI and NRB, the necessary systems will be put in place for interlinking UPI and NPI. The formal launch of the linkage, i.e., commencement of operations, will be done at a later date . The RBI and NRB will also work together to ensure compliance with the legal and regulatory frameworks of both countries, as well as international standards and best practices on cybersecurity, data protection, and anti-money laundering .
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