The central banks of India and Singapore are planning to connect their respective fast digital payment systems, the Unified Payments Interface (UPI) of India and PayNow of Singapore. This new linkage will facilitate instant, low-cost, cross-border fund transfers. The objective is to have this system fully operational by July 2022.
Key Points About UPI-PayNow Linkage
The connection of UPI and PayNow marks an important milestone in the development of infrastructure for cross-border payments between India and Singapore. This initiative aligns with the G20’s financial inclusion priorities, which focus on driving more efficient, cheaper, and transparent cross-border transactions. As a member of G20, India plays a significant role in this effort.
The linkage builds on the previous collaborative efforts of NPCI International Private Ltd (NIPL) and Network for Electronic Transfers (NETS, Singapore). These organizations have aimed to promote cross-border interoperability of payments using cards and QR codes. Their cooperative efforts serve as the foundation for bolstering trade, travel, and remittance flows between India and Singapore.
NPCI and its Global Vision
NIPL, an offshoot of NPCI, works to propagate domestic payment technologies like UPI and RuPay abroad. It also seeks to co-create payment technologies with other countries. Their vision aligns with the review of corridors and charges for inbound cross-border remittances outlined in the Payment Systems Vision Document 2019-21.
From an investor’s perspective, this development can incentivize retail investors to access global markets. Currently, they incur hefty inter-bank charges, paying up to Rs.3,000 over the Liberalised Remittance Scheme (LRS) processing fees levied by banks.
Understanding UPI and Other Indian Payment Systems
Unified Payments Interface (UPI): UPI is an advanced version of the Immediate Payment Service (IMPS). It provides around-the-clock fund transfer services and facilitates cashless payments. Launched by the National Payments Corporation of India (NPCI) with 21 member banks in 2016, UPI integrates multiple bank accounts into a single mobile application. It combines various banking features, seamless fund routing, and merchant payments under one umbrella.
National Electronic Fund Transfer (NEFT): NEFT is a national payment system that simplifies one-to-one fund transfers. It allows individuals, firms, and corporates to electronically transfer funds from any bank branch to an account with any other bank branch participating in the scheme. While there are no limits on the amount of funds that can be transferred through NEFT, cash-based remittances within India and to Nepal under the Indo-Nepal Remittance Facility Scheme are capped at Rs. 50,000 per transaction.
RuPay Card Scheme: The RuPay Card Scheme is India’s very own initiative for debit and credit card payments. The name “RuPay” is derived from ‘Rupee’ and ‘Payment.’ This card can also be used for transactions in Singapore, Bhutan, UAE, Bahrain, and Saudi Arabia.
