(#18) With NIPL, India looks to fast-track remittance growth
Through UPI's international expansion, NPCI is killing two birds with one stone- the growth of Rupay as well as inward remittance
A few weeks back I wrote Part 1 of this story where I talked about how International UPI will help Rupay in breaking the hegemony of Visa and Mastercard. Part 2 talks about how UPI’s international expansion has way larger relevance to inward remittance growth than to anything else.
Through its various interventions, the Indian government has time and again indicated that it does not want money to flow out of the country:
Oct 2020: 5% TCS (Tax collected at source) introduced on foreign remittance made through the Liberalised Remittance Scheme (LRS) and for buying foreign travel packages
Feb 2022: Government introduced 1% tax on all sell transactions of virtual digital assets (cryptocurrency, NFT, Tokens etc) and 30% taxes on gains
Oct 2023: TCS rate increased to 20%
Apr 2024: ET reported that banks have been told by the banking regulator to be ready for a possible inclusion of international credit card spends in the liberalised remittance scheme (LRS) which means same level on taxes
Which is why I was surprised when I read in the Reserve Bank of India’s annual report about the plan to take the Unified Payments Interface to 20 countries in the next 5 years because, instead of stopping international transactions, this would facilitate them.
Besides, the primary objective with which the UPI was created was financial inclusion; internationalization of UPI is not aligned with that objective. Those who travel internationally are mostly affluent, financially literate and have access to payment channels through credit, debit and prepaid cards. Thus, in all likelihood, these people are already under the digital payments net.
Then why was NIPL even created?
As I highlighted in the first part of this story, one prominent reason is that it helps in Rupay’s growth but I believe the larger reason is to grow inward remittances.
More details published in The Morning Context.