NPCI is collaborating with Indian banks experienced in the unified payments interface (UPI) system and foreign banks to develop models and conduct pilot tests, sources told ET.
NPCI is working with Indian and foreign banks to explore potential partnerships. They are engaging with FedNow or its UPI equivalent and seeking involvement from major US banks to facilitate testing and use-case development. The process is well underway, one source stated.
NPCI – US and India tie-up
FedNow, launched by the US Federal Reserve in July 2023, is a real-time payment service. NPCI has not responded to queries as of press time. The current focus is on establishing connectivity to ensure the feasibility of any future collaboration, another source added.
The proposed payment model between the US and India would initially focus on small consumer transactions due to the absence of a nationwide system in the US akin to India’s UPI, sources revealed.
It’s real-time, so the transactions would be limited in scale and value. They plan to start with modest payments. Currently, the US lacks a UPI equivalent but has alternatives like Paytm-style wallet and FedNow, stated one source.
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US banks aim to collaborate with the proposed NPCI model and American authorities to capitalize on existing capabilities, especially concerning consumer wallets used for payments.
Additionally, significant local banks in both countries would play a crucial role in facilitating consumer payments flows between the US and India. “If you want to send or receive money from a relative under the model, you can’t do it through a foreign bank which is not a consumer bank in India. It would need to be done through a large Indian bank. In the US, a person can use an American bank to send or receive money from here,” noted another source.
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In November, ET reported that the Reserve Bank of India was discussing cross-border settlements with US and Hong Kong counterparts.
An internal RBI working group is evaluating technology for direct cross-country transactions.
On Monday, the RBI announced a virtual launch of RuPay cards and UPI connectivity between India and Mauritius, along with UPI connectivity between India and Sri Lanka.