India and Nepal are making it easier to pay for things across their shared border. Following months of planning, the two countries officially launched a cross-border digital payment system on February 28th. It’s a big deal for anyone traveling or conducting business between these South Asian neighbors.
This collaboration has been in the works since June 2023, when NPCI International Payments Limited (NIPL) and Nepal Clearing House Limited (NCHL) partnered to explore the initiative. The two central banks solidified the project last month (February 15), signing and exchanging a Terms of Reference.
The RBI lauded this as promoting financial inclusion and deepening the strong ties between the two South Asian nations.
How it works (for now)
The initial focus is on Indian visitors in Nepal. Indian users of popular payment apps like BHIM and PhonePe can now scan QR codes to pay for goods and services in Nepal, with Nepalese payments to India to follow soon. This replaces a more limited card-based system, opening up opportunities for businesses, travelers, and students alike.
The Nepal Clearing House Limited (NCHL) handles transactions on the Nepal side, while the National Payments Corporation of India (NPCI) facilitates transactions for India-based banks and payment providers.
For Nepalis wishing to make payments in India, it’s not quite a two-way street yet. FonePay, a major facilitator of digital payments, is awaiting approval from the Nepal Rastra Bank. When the go-ahead is given, users of Nepali digital wallets and banking apps will also be able to scan QR codes in India.
How to activate/enable cross-border payments
Indian citizens wishing to use UPI in Nepal need to first activate the UPI International Payments feature within their PhonePe or BHIM app. Once active, they can scan Fonepay QR codes at merchants and complete payments in Nepalese rupees, with the equivalent amount deducted in Indian rupees from their account.
Merchants using eSewa, Khalti, or any apps in the Fonepay QR Network are already enabled to accept these UPI payments. But standard charges apply to merchants per transaction.
Benefits of cross-border payment
The implications of Nepal-India cross-border payments are significant. Both countries share open borders and extensive trade links. As a result, an easier cross-border payment system will boost everything from small-scale vendors to border trade and tourism.
It also aligns with Nepal’s ambitious “Digital Nepal Framework” which envisions a cashless economy and greater interoperability in the region.
Now it’s worth keeping an eye on when the Nepal Rastra Bank allows the full two-way use. That’s when this partnership could provide a blueprint for cross-border payment initiatives across the region and beyond.
