The National Payments Corporation of India (NPCI) and banks from both the United States and India are in advanced discussions to establish a real-time payment connection between the two countries. This initiative aims to capitalize on NPCI's progress in establishing cross-border payment systems.
NPCI is working along with Indian banks and foreign banks to see how they can partner
The National Payments Corporation of India (NPCI) and banks in the US and India are in advanced stages of discussions to flesh out a real-time payment linkage between the US and India, said people aware of the developments. The plan seeks to build on the domestic payments body's inroads in setting up cross-country systems.
Within the ecosystem of the unified payments interface (UPI), the NPCI is working with Indian banks that have experience with the system as well as foreign banks to develop use-case models and testing pilots, the people cited above told ET.
"NPCI is working along with Indian banks and foreign banks to see how they can partner. In addition to talking directly to FedNow or their UPI equivalent on how to connect, they also need the large US banks to partner so that the use-case, testing, etc happens. The process is in advanced stages," a person said.
FedNow is a real-time payment service created by the US Federal Reserve, launched in July 2023. NPCI did not respond to an email query till press time. The current focus is on building connectivity which would make any proposed collaboration commercially viable, a second person said.
Given that the US does not yet have a nationwide system similar to what the NPCI has done with the UPI in India, the model would initially focus on small consumer payments, people said.
"It's real time, so it won't be huge, quantum-wise or value-wise. There would be caps. They want to start slow, with small payments. As of now, the US does not have a successful UPI equivalent. They have a Paytm equivalent wallet kind of thing, FedNow etc, which people use," the first person said.
For US banks, which already have a large share of US-based consumer wallets used for payments, the idea is to partner with the new model being proposed by the NPCI and American authorities to leverage the existing capabilities.
Also, large local banks in India and the US would also need to step in to cater to the huge market for consumer payments flows between the two nations. "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," another person said.
ET had reported in November that the Reserve Bank of India was in talks with counterparts in the US and Hong Kong to assess the feasibility of cross-border settlements.
An internal RBI working group has been exploring the best available technology to develop a roadmap of how such transactions can take place directly between two countries.
On Monday, a virtual launch of RuPay cards and UPI connectivity between India and Mauritius, as well as UPI connectivity between India and Sri Lanka was announced by the RBI.
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