On 23 November 2022, India’s Minister of External Affairs Dr S Jaishankar and the Minister of Foreign Affairs and International Cooperation of the United Arab Emirates (UAE) Sheikh Abdullah Bin Zayed Al Nahyan explored avenues for bilateral collaboration in the areas of food security, increasing trade and investment, and cooperation at the United Nations Security Council. However, what went under the radar was their discussions
on facilitating bilateral trade through Indian rupees and UAE dirhams, as well as the utilisation of India’s Unified Payments Interface (UPI) for remittances for the Indian community in the UAE.
The National Payments Corporation of India (NPCI) has allowed Non-Resident Indians (NRIs) from 10 countries to avail
of the Unified Payment Interface (UPI) services for money transfers. These countries include Singapore, Australia, Canada, Hong Kong, Oman, Qatar, the United States, Saudi Arabia, the United Arab Emirates, and the United Kingdom. The US and UAE are reportedly the largest remittance markets in India.
UPI going international
UPI has gained widespread acceptance in India. It has rapidly expanded as a payment settlement infrastructure by enabling simple peer-to-peer transactions across multiple banks and platforms with a single pin. India’s success with this innovation has spurred several other countries to implement the UPI model. To achieve this goal, NPCI’s international arm, NPCI International Payments Ltd (NIPL
), has formed partnerships with banks in countries such as the UAE
, and Japan
NIPL announced its collaboration with Mashreq Bank in the UAE to help the NRI community and two million Indians who travel to the country for business or leisure.
For example, NIPL announced its collaboration
with Mashreq Bank in the UAE to help the NRI community and two million Indians who travel to the country for business or leisure. In July 2021, NPCI joined forces with the Royal Monetary Authority of Bhutan to bring UPI-based payments to Bhutan
. Other successful international partnerships
include the US Discover Financial Services, Japan Credit Bureau, China’s Union Pay International, the UK’s PPRO Financial, and Singapore’s Network for Electronic Transfers and Liquid Group.
UPI in the UAE
with Mashreq Bank greatly enhanced the digital payment ecosystem in the UAE and expanded UPI’s reach globally. Indian visitors to the UAE and the NRIs settled there will now be able to use UPI-based mobile applications to pay for purchases at merchants and shops in the UAE. Enabling P2M (peer-to-merchant) transactions will be a crucial step in understanding and assessing future use cases of UPI. When they start, cross-border P2P (peer-to-peer) transfers could disrupt traditional remittance channels.
Remittances from the Gulf
Indians who work in the UAE send a portion of their earnings back to their families in India through remittances. Foreign remittances are a significant source of stable financial support for many households and contribute to India’s economic growth with increased capital flows, consumption and investments. The UAE
is the second-largest source of remittances to India, given the high number of Indian workers employed in various industries such as construction, hospitality, and retail. The availability of UPI to the UAE-based NRIs and other Gulf countries through international mobile numbers will have a significant impact on the volume of foreign currency remittances to India.
UPI enables P2P money transfers from one bank account to another via individual mobile applications or online platforms.
Purpose of Remittances, 2020-21
Source: RBI Bulletin
|Purpose of Remittance
|Share in total Remittances (%)
|Family maintenance (i.e., consumption)
|Deposits in Banks
|Investments (landed property /equity shares/etc.)
, Headwinds of COVID-19 and India’s Inward Remittances
Remittance is a money transfer from one party to another, usually overseas, and is thus a P2P transfer. UPI enables P2P money transfers from one bank account to another via individual mobile applications or online platforms. Such UPI-enabled P2P transfers are fast, convenient, and secure, resolving some of the fundamental problems of international remittances, including time zone differences, delays, and transfer uncertainty.
Country-wise Share in Inward Remittances, 2020-21
Source: RBI Bulletin
|Share in Total Inward Remittance (%)
|United States (G20)
|United Arab Emirates (GCC)
|United Kingdom (G20)
|Saudi Arabia (G20 and GCC)
, Headwinds of COVID-19 and India’s Inward Remittances
Future of remittances
The development of UPI-enabled remittance mechanisms in the Gulf requires integration and interoperability. For example, the integration of India's UPI with PayNow in Singapore is expected to go live soon, lowering the cost of sending remittances by up to 10
percent. The most significant challenges to this integration, rather than technological ones, have been identified as data-sharing regulations, adoption cost barriers, and legal obstacles. Implementation of UPI-enabled remittance will allow users to quickly transfer funds between countries using phone numbers and UPI virtual payment addresses (VPAs).
With UPI now available in the UAE and a few other GCC countries, remittances may increase in the coming months and years as NRIs can now make payments using UPI platforms. The increased availability of UPI will simplify and streamline the process of sending money to India, potentially reducing the need for traditional currency exchange services. This shift to a digital payments ecosystem may lead to a decrease in remittances made through these conventional money transfer channels
The increased availability of UPI will simplify and streamline the process of sending money to India, potentially reducing the need for traditional currency exchange services.
UPI has become one of the most popular products in the India Stack
portfolio, allowing users to transfer money from one bank account to another using QR codes and mobile numbers. The NIPL's collaboration with Mashreq bank could pave the way for a UPI-enabled remittance channel between the UAE and India. However, for such a remittance channel, India's UPI must work with its UAE counterpart, just as it has done with Singapore's PayNow. NIPL can provide technical assistance through licencing and consulting for developing real-time payment systems to meet the fast-changing requirements of international remittances in countries like the UAE.
P2P transfers between individuals and families can significantly boost economic growth and help people during tough times. By getting money directly into the hands of those who need it most, these transfers can play an important role in stimulating
local economies. Direct payments can effectively deliver financial support to individuals in developing countries, which other forms of capital flows, such as official development assistance and private investment, cannot achieve. As a result, it is crucial for nations across the world to utilise technology, such as the UPI, to realise their development goals. India must leverage its global leadership in digital payments infrastructure and its current G20 presidency to lead the way and provide technological solutions to other nations.
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