India-Nepal Financial Cooperation Strengthened, Digital Payment to be Launched Soon

In a recent development, India and Nepal have bolstered their financial cooperation, with a focus on digital payments. This initiative aims to streamline cross-border transactions and enhance convenience for citizens of both nations.

New Guidelines by Reserve Bank of India (RBI)

• Nepal’s Ambassador to India, Shankar Sharma, praised the updated guidelines of the Reserve Bank of India.
• The new regulations permit multiple financial services between the people of India and Nepal.
• Notable changes include allowing Nepal citizens to send Rs 2 lakh per transaction to Nepal, with walk-in customers able to remit Rs 50,000 per transaction.

Inauguration of Unified Payment Interface-Nepal Clearing House Ltd (UPI-NCHL)

• Ambassador Sharma announced the impending inauguration of the Unified Payment Interface-Nepal Clearing House Ltd (UPI-NCHL).
• This digital payment mechanism is expected to eliminate the inconvenience of carrying cash.
• The UPI-NCHL collaboration is poised to enhance the efficiency and security of cross-border transactions between India and Nepal.

Collaboration between NPCI International Payments Limited (NIPL) and Nepal Clearing House Limited (NCHL)

• In June 2023, NIPL and NCHL partnered to facilitate cross-border digital payments between India and Nepal.
• This collaboration integrates the Unified Payments Interface (UPI) of India and the National Payments Interface (NPI) of Nepal.
• The memorandum of understanding (MoU) exchanged between NIPL and NCHL underscores their commitment to establishing seamless financial connectivity between the two countries.

Future Prospects and Institutional Framework

• The initial engagement focuses on inward and outward transfers between banks in India and Nepal.
• The integration between UPI and NPI enables existing instruments for cross-border transactions and will later extend to other merchant payments.
• Nepal Clearing House Limited (NCHL), backed by investment from Nepal Rastra Bank and commercial banks, plays a pivotal role in facilitating these financial transactions.