From Temple Rituals to Tech Triumphs: Could NIPL Transform International Payments?
Have you ever heard of the Chilkur Balaji temple in Telangana? If you live in Hyderabad, you might have. Or if you applied for a visa and got rejected, you definitely have. Devotees circumambulate the shrine eleven times, praying for visa approval. Those who succeed come back and make one hundred eight more circuits. In our school days, we talked about brain drain, writing essays on whether it was a boon or bane. Now, nobody talks about it. Instead, we celebrate people as India’s biggest export.
We boast about Big Tech having Indian CEOs — Satya Nadella, Sundar Pichai, Shantanu Narayen. We celebrate India being the second-largest supplier of international students, projecting over one million students to go abroad soon. We highlight the Indian diaspora’s achievements, like being the highest-income ethnic group in the US.
India received one hundred twenty-five billion dollars in inward remittances in twenty twenty-three, about three-point four percent of our GDP and twice as much as the second highest recipient, Mexico. With N.I.P.L, meaning N.P.C.I International Payments Limited, Is India looking to fast-track remittance growth? The success of U.P.I is what is inspiring the government to explore the internationalization of the instant payment system, mainly with the aim of swelling its kitty.
But the Indian government has also shown it doesn’t want money to flow out. In October 2020, a five percent tax collected at source was introduced on foreign remittances and buying foreign travel packages. In February twenty twenty-two, a one percent tax on virtual digital assets and a thirty percent tax on gains were introduced. In October twenty twenty-three, the tax collected at source rate was increased to twenty percent. And in April twenty twenty-four, a report said banks were told to be ready to include international credit card spends in the Liberalized Remittance Scheme.
So, it was surprising to read in the Reserve Bank of India’s annual report about taking the Unified Payments Interface (U.P.I) to twenty countries in the next five years. Instead of stopping international transactions, this would facilitate them.
The U.P.I was created for financial inclusion, but internationalization isn’t aligned with that goal. Those who travel internationally are mostly affluent and financially literate, already under the digital payments net. Then why create NPCI International Payments Limited (N.I.P.L)?
One reason is to expand the international coverage of Rupay, but a bigger reason is to expand inward remittances. India is the largest recipient of remittances, estimated at one hundred twenty-five billion dollars in twenty twenty-three and forecast to hit one hundred thirty-five billion dollars in twenty twenty-four. But sending money to India is still inconvenient, expensive, and slow.
An N.R.I must find a remittance agent, answer questions, and support answers with documents. They need to remember all relevant bank details. Remitters pay fees, higher exchange rates, and hidden charges. As per World Bank estimates, sending two hundred dollars to India in Q3 of 2023 cost four point nine five percent. It takes one to five days for the money to reach the recipient’s account.
Some people send money through hawala networks, a loss of foreign exchange to the government and support for illegal activities. Others defer or cancel remittances, leading to lower foreign exchange earnings.
At the other end is U.P.I — super easy, free, and instant. This difference may have sparked a conversation at NPCI:
“U.P.I is doing wonders. Why not bring its benefits to inward remittances and allow people to send money through U.P.I?”
“Great idea! But how do we convince countries to connect their payment systems with India’s?”
“Let’s first make it easier for Indians to spend money abroad. Then, focus on connecting payment systems to ease inward remittances.”
N.I.P.L CEO Ritesh Shukla said to Forbes: “When we go outside India, we focus on building interoperability. One is for travelers to make U.P.I payments abroad. The other is for Indians living abroad to send money home faster and more efficiently.”
India aims to build a two-way street. One lets users spend internationally; the other brings money back. A win-win for everyone. Banks would serve customers at a lower cost by replacing the SWIFT messaging system with U.P.I, likely leading to higher retention. Customers would enjoy cheaper, instant remittances, needing only a mobile number or U.P.I Identity.
India would benefit from higher, faster remittances. N.I.P.L is targeting countries contributing the most to inward remittances. The UAE and Singapore are first because they are top contributors and have friendly relations with India, making it easier to connect payment systems.
U.P.I-PayNow partnership is already clocking over one hundred transactions a day. N.I.P.L plans to expand U.P.I to twenty-plus geographies in the next five years. Conversations with Gulf Cooperation Council nations are underway, and RBI has signed an agreement with Nexus to connect with fast payment systems globally.
The recent elevation of India’s status on the Financial Action Task Force categorization adds credibility to U.P.I’s stringent regulatory environment. India also plans to export U.P.I technology, helping other nations build similar systems, likely interoperable with U.P.I from day one.
The goal is an interoperable network across key countries, creating a convenient, cheaper, and faster system — just like U.P.I’s growth. This will lead to the growth of inward remittances, benefiting India’s economy.
References
Bhattacharya, A (2020, November 1) How a 500-year-old Indian temple became a shrine for H-1B visa hopefuls. Quartz.
Bignell, F. (2024, July 6). NIPL and Network International Join Forces to Simplify Payments for Indian Tourists and NRIs in UAE. The Fintech Times.
Binani, R.(2024, July 6) With NIPL, India looks to fast-track remittance growth. The Morning Context.
Livemint. (2023, July 17). UPI to enter North America, other Middle-Eastern countries soon: NIPL CEO. Mint.
Livemint. (2024, June). RBI and NPCI working to expand UPI to 20 countries by 2029 shows central bank’s annual report. Mint.
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