The Nepal government is making preparations to sign an agreement to enable financial transactions between Nepal and India through QR codes.
Preparations are underway to reach an agreement to implement the Unified Payments Interface (UPI) system during Prime Minister Pushpa Kamal Dahal's visit to India.
Cross-border payments between Nepal and India will be made online once the UPI service is launched between the two countries.
With the launch of the service, Indians will be able to pay by scanning the QR code when they come to Nepal and Nepalis will also be able to pay by scanning India-QR while traveling in India.
Payment services of Indian banks and financial institutions and other payment service providers such as BharatPe, Google Pay, Paytm, etc., can be used to make business transactions between Nepali and Indian traders through QR payment.
Also, bank customers can also make payments to Indian merchants using this facility. UPI has been implemented in more than 33 countries so far. UPI was implemented in India in 2016. Now even UAE has implemented UPI.
Rastra Bank Deputy Spokesperson Narayan Prasad Pokharel said that UPI should be taken seriously as it is a matter of cross-border digital payments.
“Nepal has the largest number of Indian citizens. They said that it would be easy to do digital transactions", Pokharel said, "Rastra Bank is positive about UPI. But it is not clear what the necessary infrastructure should be for that.”
He said that with the G2U (Government to Government) agreement on digital transactions between Nepal and India, it will be clear how to implement UPI.
After that, the business can be done only after the agreement between Nepal Rastra Bank and Reserve Bank of India.
Since Nepal and India have open borders, there is a lot of interaction between Indians and Nepalis. Indian citizens come to visit Nepal and Nepalis also have to pay money when they visit India.
Most of the tourists entering Nepal are Indians. At present, notes above IRs 500 in denominations are banned in Nepal, which has posed difficulty for Indians.
Many Nepalis have gone to India for employment. When they send small amounts of money now, they send it through relatives and neighbors. UPI will solve this problem.
At the G-20 conference held in India last February, Secretary at the Ministry of Electronics and Information Technology Alkesh Kumar Sharma said that UPI will soon be used in Nepal.
He had informed the Indian media that the talks between the two countries were at the final stage.
Agreement with India one year ago
Meanwhile, Nepali company Gateway Payment Services Pvt Ltd has signed an agreement with National Payments Corporation of India (NPCI) for UPI Nepal operation based on connectivity and mobile first technology.
The company signed an agreement with NPCI International and Manam Infotech in February 2022.
According to Gateway Payment, with the agreement, now the electronic payment network between various banks, financial institutions, payment service providers and various payment service providers from India can be transferred immediately to any bank account or wallet account in Nepal through Paytm, Google Pay, PhonePe etc.
UPI is operated by NPCI in India and has played an important role in India's electronic economy. The company claims that UPI based on this technology will greatly help in transforming Nepal into a cashless society.
These banks are ready to implement UPI in Nepal
Gateway Payment Service has already tied up with half a dozen banks in Nepal. About 1 year ago, Global IME Bank entered into an agreement with Gateway Payment Services Pvt. Ltd.
Similarly, Nabil Bank has also signed an agreement with UPI Nepal. The deal was sealed in May 2022.
Apart from this, there was an agreement between Machhapuchchhre Bank and UPI, while Everest Bank, Nepal SBI Bank, Sunrise Bank have also signed an agreement with Payment Nepal.
Therefore, with the upcoming G2G agreement, using the bank's mobile banking apps, when purchasing goods for its customers in India, transactions can be made through the Indian payment system through QR.
Customers can also transfer funds from Indian banks and financial institutions and other payment service providers to their bank accounts. It will also boost cross border remittance business.
"For digital transactions, the infrastructure is prepared and implemented after the agreement between the governments of the two countries," said Joint Spokesperson Pokharel, "a single gateway is required for cross-border transactions, otherwise it will be difficult to integrate transactions."
Rastra Bank estimates that domestic demand for Indian currency may decrease due to digital transactions.
"Both the Indian side and Nepal are excited to use the UPI system in Nepal", Pokhrel added, "it will be very convenient for the citizens of both countries." What are the risks to implement, has not been studied.
Since this is a transaction of absolute amount, it seems necessary to minimum criteria including customer privacy, secure transaction.
Rastra Bank has discussed with NCHL and others for its implementation.
What is UPI?
UPI (Unified Payments Interface) is an instant payment system developed by National Payments Corporation India (NPCI). It supports interbank peer to peer (computer-to-computer) and person-to-merchant (P2M) transactions.
It is mainly used on mobile devices to transfer money between two bank accounts instantly. For this the mobile number must be linked to the bank account.
