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In a move that promises to revolutionize cross-border payments, the central banks of India and Nepal have signed terms of reference to link their respective fast payment systems – the Unified Payments Interface (UPI) and the National Payments Interface (NPI). This landmark collaboration aims to facilitate instant, low-cost fund transfers between the two countries, significantly streamlining remittance processes for individuals and businesses alike.

Benefits of the Linkage:

  • Faster and Cheaper Remittances: Currently, sending money across borders often involves hefty fees and processing delays. The UPI-NPI linkage will bypass traditional channels, enabling real-time transfers at minimal costs. This will prove especially beneficial for migrant workers, students, and businesses with cross-border transactions.
  • Financial Inclusion: By leveraging the widespread reach of UPI and NPI, the linkage will extend financial services to even remote areas, promoting financial inclusion in both countries. Individuals without access to traditional banking channels will be able to send and receive money seamlessly.
  • Boosting Bilateral Trade: Simplified and affordable cross-border payments are expected to fuel trade activities between India and Nepal. This will benefit businesses of all sizes, ultimately contributing to economic growth in both nations.

Understanding the Magic of UPI & NPI: Demystifying the Linkage

Both UPI and NPI are real-time payment systems that rely on mobile phone technology to facilitate instant money transfers. Here’s a simplified breakdown of their individual functionalities:

UPI (India):

  • Virtual Payment Address (VPA): Users link their bank accounts to unique identifiers like phone numbers or email addresses, acting as their VPAs. This eliminates the need to share account details for transactions.
  • Unified Payments Interface: UPI acts as a messaging system between banks, routing payment requests and confirmations instantaneously.
  • PIN-based Security: Transactions are authorized by a Personal Identification Number (PIN) set by the user, ensuring secure authentication.

NPI (Nepal):

  • Similar to UPI: NPI shares many core functionalities with its Indian counterpart, including VPAs, real-time transfers, and PIN-based security.
  • Key Differences: NPI may have variations in specific features and user interfaces compared to UPI.

The Linkage Magic:

The UPI-NPI linkage essentially creates a bridge between these two systems. When a user in India wants to send money to Nepal:

1. They enter the recipient’s NPI VPA in their UPI app.

2. The UPI system routes the request to the linked NPI infrastructure.

3. NPI verifies the VPA and beneficiary details.

4. Funds are deducted from the sender’s account in India and credited to the recipient’s account in Nepal, all in real-time.

India and Nepal to Deepen Financial Ties with UPI-NPI Linkage

This linkage eliminates the need for intermediaries and complex currency conversions, leading to faster, cheaper, and more convenient cross-border transactions.

Remember, this is a simplified explanation, and the actual technical processes involve secure communication protocols and interbank settlements. But hopefully, it gives you a basic understanding of how UPI and NPI work together to enable seamless financial flows between India and Nepal.

The Way Forward:

While the terms of reference have been finalized, the official launch date remains to be announced. Both central banks will now work together to establish the necessary infrastructure and regulations to ensure a smooth and secure integration.

Positive Impact:

The UPI-NPI linkage is a significant step forward in fostering financial cooperation between India and Nepal. It has the potential to not only simplify cross-border transactions but also strengthen the economic and cultural ties between the two countries. As the implementation progresses, it will be interesting to see how this initiative shapes the future of financial services in the region.


Reserve Bank of India

Date : Feb 15, 2024

Terms of Reference signed between Reserve Bank of India and Nepal Rastra Bank on Integration of Unified Payments Interface (UPI) of India with National Payments Interface (NPI) of Nepal for cross-border remittances

Reserve Bank of India and Nepal Rastra Bank today signed and exchanged Terms of Reference for integration of fast payment systems of India and Nepal, viz., Unified Payments Interface (UPI) of India and National Payments Interface (NPI) of Nepal, respectively. The integration is aimed at facilitating cross-border remittances between India and Nepal by enabling users of the two systems to make instant, low-cost fund transfers.

2. The collaboration between India and Nepal in linking their fast payment systems through the UPI-NPI linkage will further deepen financial connectivity and reinforce the enduring historical, cultural, and economic ties between the two countries.

3. Based on the Terms of Reference exchanged between RBI and NRB, the necessary systems will be put in place for interlinking of UPI and NPI. The formal launch of the linkage i.e., commencement of operations will be done at a later date.

(Yogesh Dayal)
Chief General Manager

Press Release: 2023-2024/1882

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April 2024