February 16: Stakeholders of Nepal and India have decided to establish a regulatory mechanism to start the cross-border payment service between the two countries. Eight months after a formal agreement between the two countries to operate inter-state payment service, the authorities concerned have started technical preparations.

The United Payment Interface (UPI), which is working as a payment switch in India, and the National Payment Interface (NPI), which is working as a payment switch in Nepal, reached an agreement on Thursday to establish a bilateral regulatory mechanism. Nepal Rastra Bank confirmed that the mechanism has been created to carry out the necessary preparations before starting cross-border payments.

"Regulatory and technical work is necessary to start cross-border payment," said Deputy Information Officer of Nepal Rastra Bank, Bhagwat Acharya, adding, “The two countries have signed an agreement to create a bilateral regulatory mechanism for seamless payment service.”

The mechanism will also determine the amount of money that can be paid in which areas using which technology and the service fee.

During the state visit of Prime Minister Pushpa Kamal Dahal to India last May, Nepal and India had reached an understanding to start the cross-border payment service.

NIPL, the international branch of National Payments Corporation of India (NPCI), and Nepal Clearing House Limited (NCHL) in which Nepal Rastra Bank has its stakes, signed an agreement to this effect during the visit.

Then in August, NIPL also entered into an agreement with Nepal's private sector payment service provider, PhonePay, for the operation of cross-border payment service. The agreement was signed at the Global Fintech Fest 2023 in the presence of Nepal Rastra Bank’s Governor Maha Prasad Adhikari.

Although the Indian side has signed agreements with two Nepalese companies for the cross-border payment service, this service has not yet been started due to lack of regulatory approval. Both companies of Nepal have said that the necessary preparations for service operation have been completed. Both the companies have applied with Nepal Rastra Bank seeking permission to operate the service.

If the cross-border payment service comes into operation, the compulsion of citizens of both countries to carry cash for travel and business will end. This is expected to increase trade, tourism and other activities between the two countries.