Decoded: What the India-Singapore real-time payment linkage is all about

India, Singapore cross-border retail payments & remittances amount to over $1 billion annually

On Tuesday, India and Singapore launched a real-time linkage between their respective payment systems – Unified Payments Interface (UPI) and PayNow – to facilitate seamless cross-border payments. 

The pact to link UPI and PayNow was signed back in September 2021 to enable users to make low-cost fund transfers between the two countries.

The linkage was kicked off by a live cross-border transaction between Reserve Bank of India Governor Shaktikanta Das and Monetary Authority of Singapore (MAS) Managing Director Ravi Menon using mobile phones. 

So what does this linkage aim to achieve and how will the transactions take place? Let’s find out.

Why has the linkage been done?

Cross-border retail payments and remittances between Singapore and India amount to over $1 billion annually. But typically, cross-border transfers involve hefty fees and take quite a bit of time. 

The UPI-PayNow linkage is expected to enable users of the two fast payment systems in either country – India and Singapore – to make convenient, safe, instant, and cost-effective cross-border fund transfers using their respective mobile apps. 

The UPI-PayNow linkage is the world’s first real-time payment systems linkage to use a scalable cloud-based infrastructure that can accommodate a future increase in the volume of remittance traffic. 

The transactions through this linkage can be carried out with ease, similar to how the domestic transactions through UPI or PayNow take place, and the transaction can be completed within a minute.

How will it be done?

According to the RBI, funds held in bank accounts or e-wallets can be transferred to / from India using just the UPI-id, mobile number, or Virtual Payment Address (VPA). 

For example, a Singapore PayNow user sending money to India will need to key in the recipient’s registered UPI identity, the remittance amount in Indian Rupees or Singapore Dollars. Then they have to confirm the payee's name and payment details, post which the funds will be transferred successfully. 

Similarly, an India UPI user sending money to Singapore will need to key in the recipient’s registered PayNow mobile number or VPA. UPI identity and VPA are identifiers that are uniquely linked to an individual bank account.

Which are the players involved?

Initially, State Bank of India, Indian Overseas Bank, Indian Bank and ICICI Bank will facilitate both inward and outward remittances, while Axis Bank and DBS India will facilitate inward remittances. For Singapore users, the service will be made available through DBS-Singapore and Liquid Group (a non-bank financial institution). However, more banks would be included in the linkage over time, the central bank has said.

What is the cap on the amount that can be transferred through this linkage?

A daily transaction limit of Rs 60,000, which is equivalent to around SGD 1,000, has been fixed for undertaking cross-border remittance transactions through the UPI-PayNow linkage.

At the time of making the transaction, the system will dynamically calculate and display the amount in both the currencies for the convenience of the user.

This linkage allows only person to person (P2P) remittances towards the purpose of “Maintenance of Relatives Abroad” & “Gift” under the Liberalised Remittance Scheme (LRS), and the prescribed LRS limits would be applicable. 

According to the LRS, which was introduced in 2004, all resident individuals, including minors, are allowed to freely remit up to $250,000 per financial year for any permissible current or capital account transaction or a combination of both.

What are the RBI and MAS hoping to achieve?

The idea is to ensure that the service is cost-efficient and accessible, including to foreign workers and students residing in Singapore and India, enabling them to make and receive low-cost cross-border remittances back to and from their home countries. The participating institutions have committed to this goal. According to MAS, the linkage also provides for automatic incorporation of capital control rules for enhanced efficiency. MAS and RBI will review and progressively scale the linkage by increasing the number of participating financial institutions, as well as applicable use cases.

Have such linkages been done earlier?

While this is a first of a kind collaboration for India, Singapore has already established a cross-border payments link with Thailand and is working on one with Malaysia.