Nepal and India expedite preparation to start cross-border digital payment system

Published On: February 16, 2024 09:15 AM NPT By: Republica | @RepublicaNepal

KATHMANDU, Feb 16: The authorities concerned of Nepal and India have stepped up measures to develop a separate mechanism for an electronic payment system between the two countries. This has been agreed upon at the government level.

According to Nepal Rastra Bank (NRB), National Payments Interface, Nepal and Unified Payment Interface, India on Thursday inked an agreement in this regard. In the bilateral agreement, the two sides consented on establishing a joint mechanism to look over the transaction to be carried out via the electronic payment system. NRB Governor Maha Prasad Adhikari and Reserve Bank of India (RBI) Governor Shaktikanta Das were present at the agreement signing ceremony, which was held in Mumbai, India.

The initiative is expected to facilitate cross-border transactions between the two countries by using electronic payment gateways. The NRB says it will prove to be a milestone in digital payment of Nepal with India.

Once the digital payment will commence, the system will allow people-to-people funds transfer through mobile banking. According to the Nepal Clearing House, Nepali users can make a bank transfer to India with a unified payment interface (UPI) ID through mobile banking. Similarly, Indian users can make bank transfers to Nepal through a unique identifier—which can be a mobile number.

The cross-border payment system is expected to be a boon also for Indian visitors as they will be spared the hassle of carrying bundles of cash since Indian banknotes of denominations of above INR 100 are banned in Nepal.

Earlier, the bilateral agreement for the digital payment system was signed during the India visit of Prime Minister Puspa Kamal Dahal last June. The system was supposed to come online by January end this year. However it has now been delayed by over a month citing a delay with the Indian banks that are needed to update their mobile apps to incorporate Nepal’s payment features.

In January 2023, the NRB amended a policy to open the door to foreign investors to participate in Nepal's digital payment system. The revised guidelines allow foreign direct investments in payment service provider firms and payment system operator firms up to 15 percent of the total capital.