One Border Less : UPI-Paynow Linkage : Daily Current Affairs

Date: 24/02/2023

Relevance: GS-3: Bilateral, regional, and global groupings and agreements involving India and/or affecting India’s interests.

Key Phrases: Cross-Border Real-Time Payments Systems Linkage, Round-The-Clock Payments, Person-To-Person (P2P), JAM Trinity Of Jan Dhan, Aadhaar And Mobile Phones, Digital Inclusion, Person-to-Person (P2P) Remittances.

Why in News?

The Union government has unveiled India’s first cross-border real-time payments systems linkage, with the Unified Payments Interface (UPI) connecting with Singapore’s PayNow payment system.

Key Highlights:

This connectivity, which will allow for the transfer of funds using only a UPI id, mobile number, or virtual payment address, is meant to provide a “low-cost real-time” option to users for transferring money across borders.
This is an encouraging development.

What is UPI?

Unified Payments Interface (UPI) is India’s mobile-based fast payment system, which facilitates customers to make round-the-clock payments instantly, using a Virtual Payment Address (VPA) created by the customer.
It eliminates the risk of sharing bank account details by the remitter.
UPI supports both Person-to-Person (P2P) and Person-to-Merchant (P2M) payments and it also enables a user to send or receive money.
It is developed by the National Payment Corporation of India (NPCI) and regulated by RBI.
NPCI launched UPI with 21 member banks in 2016.
India is expanding UPI-based infrastructure in many foreign countries such as Singapore's PayNow has been linked with UPI.

UPI And Its Achievements

The introduction of UPI in 2016-17 led to a dramatic change in the electronic payments landscape of the country.
Along with the JAM trinity of Jan Dhan, Aadhaar, and mobile phones, this payment architecture has been instrumental in facilitating the dramatic growth of digital payments in the country, aided by a conducive regulatory framework.
In January 2023, roughly 8 billion transactions were carried out on the UPI platform, whose value touched almost Rs 13 lakh crore.
The convenience of real-time transfer of payments, the zero-cost framework for users, and the rapid expansion in the acceptance touch-points have encouraged its widespread adoption.
This has also aided in accelerating financial inclusion by providing access to financial services at low cost.

What Is PayNow?

PayNow is a fast payment system in Singapore.
It enables peer-to-peer funds transfer service, available to retail customers through participating banks and Non-Bank Financial Institutions (NFIs) in Singapore.
It allows users to send and receive instant funds from one bank or e-wallet account to another in Singapore by using just their mobile number, Singapore National Registration Identity Card (NRIC)/Foreign Identification Number (FIN), or VPA.

What Is The UPI-Paynow Linkage?

Cross-border retail payments are generally less transparent and more expensive than domestic transactions.
The UPI-PayNow linkage is a significant milestone in the development of infrastructure for cross-border payments between India and Singapore and closely aligns with the G20’s financial inclusion priorities of driving faster, cheaper, and more transparent cross-border payments.

Facilities To Be Provided Under The Linkage:

The RBI has clarified that in the UPI-PayNow interlinkage transactions, only person-to-person (P2P) remittances towards the purpose of “Maintenance of Relatives Abroad” and “Gift” under the Liberalised Remittance Scheme (LRS) are allowed, and the prescribed LRS limits would be applicable.
Funds held in bank accounts or e-wallets can be transferred to and from India using just the UPI-id, mobile number, or Virtual Payment Address (VPA).
Currently, the cross-border transaction under the linkage is not possible on popular UPI platforms like PhonePe, Google Pay, and Paytm.

Liberalized Remittance Scheme [LRS]

The LRS is a program implemented by the government of India to facilitate a greater flow of funds remitted to and from India.
This scheme was introduced to reduce transaction costs, increase the speed of money transfers, and enhance the attractiveness of investments in India.

How Will It Benefit The Citizens Of Both Countries?

The UPI-PayNow linkage will enable users of each of the two fast payment systems to make instant, low-cost fund transfers on a reciprocal basis without a need to get on board the other payment system.
It will also help the Indian diaspora in Singapore, especially migrant workers, and students, through the instantaneous and low-cost transfer of money from Singapore to India and vice-versa.
Of the total inward remittances to India in 2020-21, the share of Singapore stood at 5.7 percent, according to the RBI Remittance Survey, 2021.

Source: Indian Express

Mains Question:

Q. The UPI-PayNow linkage is a significant milestone in the development of infrastructure for cross-border payments between India and Singapore.” Elaborate. (250 Words).