GS Paper III

News Excerpt

Recently, India's Unified Payment Interface (UPI) services were rolled out in Sri Lanka and Mauritius.

More details on the news:

• The launch of the Indian services in Sri Lanka and Mauritius came amid New Delhi's increasing bilateral economic ties with the two countries.
• The move enables the availability of UPI settlement services for Indian nationals travelling to Sri Lanka and Mauritius, as well as for Mauritian nationals travelling to India.
• The extension of RuPay card services in Mauritius is a noteworthy development, enabling Mauritian banks to issue cards based on the RuPay mechanism.
• This move is expected to facilitate the usage of RuPay cards for settlements in both India and Mauritius, fostering enhanced financial integration between the two countries.

Government’s push for a global acceptance of UPI:

• The government has been successfully pushing for a global acceptance of UPI. Several countries have adopted different forms of Indian payment systems with Europe being among the latest regions to accept India's payment systems.
• France, UAE, Mauritius, Sri Lanka, Singapore, Bhutan, and Nepal are among some of the countries that accept UPI payments, according to the government.

• The UPI service allows customers to make instant payments at any time of the day, and it uses a Virtual Payment Address (VPA) to complete transactions.

Expanding UPI Globally: Opportunities and Challenges

• The bilateral tip-up with France and other nations like Singapore, UAE, etc., is an important step in taking UPI global.
• Today, a significant part of payment network revenues come from cross-border transactions. So, it can also be a threat to international card networks if UPI’s global acceptance keeps growing.
• Unlike Visa and Mastercard, which have a treasury that helps process cross-border transactions at competitive rates, the NPCI does not yet have a treasury of its own.
• The underlying transactions are still happening via bank-to-bank cross-border transfers through conventional means.
• Therefore, for UPI to be successful, NPCI should have its own treasury to compete directly with international networks on cross-border payment acceptance.
• There is also scope to use blockchain technology and bilateral CBDC tie-ups to process cross-border UPI transactions, which will provide NPCI with a competitive edge. 

Conclusion:

India's UPI expansion in Sri Lanka and Mauritius, coupled with the growing global acceptance, showcases positive strides in financial integration. With proactive government initiatives, leveraging blockchain and bilateral ties, UPI's success holds promise, fostering stronger economic connectivity and international recognition.