India, Singapore To Link Fast Payment Systems UPI, Paynow – Free PDF Download

What has happened?

• The Reserve Bank of India (RBI) and the Monetary Authority of Singapore (MAS) last week announced a project to link their respective fast payment systems by July 2022.
• Under this initiative, India’s home-grown payments system, the Unified Payments Interface (UPI), will be linked to Singapore’s PayNow.

What is the new payments link?

• The new project will allow users of either country’s payments system to transfer money to the other without on-boarding themselves on the other system.
• This can significantly cut down on the time taken and the costs of foreign exchange transfers to Singapore.
• The project is to be operationalized in July 2022.
• The linkage builds upon the National Payments Corporation of India’s (NPCI’s) partnership with Singapore’s Liquid Group,
• Which may allow BHIM app users to make UPI-QR code-based payments at merchants in North Asia and South-East Asia from early 2022.

How is money transferred at present?

• Indian residents can send up to $250,000 per year outside India under the Liberalized Remittance Scheme (LRS) of RBI.
• This is currently done in most banks by filling up lengthy paper forms.
• The bank provides a foreign exchange quote, which can be quite steep for individuals sending small amounts of money. 
• Thereafter, you can make the transfer through your nearest bank branch.
• The money is then sent through the SWIFT system.
• Some banks offer this process through net banking.
• You can also make payments to foreign merchants through credit cards.
• However, you cannot transfer money abroad through UPI.

What about the costs involved in forex transfers?

• Banks levy hefty charges for transfers of small amounts of foreign exchange.
• The UPI-Pay Now link has the potential to slash costs and the time taken for such transfers.
• However, the rupee is a partially convertible currency with limited liquidity in global currency markets.
• Hence, forex mark ups or spreads levied by banks may not disappear altogether.

What about taxes and reporting?

• People remitting money need to fill up the LRS form and mention the reason for remitting the money.
• They have to also ensure that the amount sent is less than $250,000 per year.
• In addition, tax collected at source (TCS) of 5% is imposed on LRS transfers above ₹7 lakh.
• A single UPI transfer is capped at ₹1 lakh.
• TCS will become applicable if the cumulative amount through such transfers crosses ₹7 lakh per year.
• In addition, forex charges for small transfers are quite high.
• It is not clear if they will continue to be so  for  transfers  through  the  new  link.

conclusion

• The UPI-PayNow linkage is a significant milestone in the development of infrastructure for cross-border payments between India and Singapore, and Closely aligns with the G20’s financial inclusion priorities of driving faster, cheaper and more transparent cross-border payments.
• The reduction in time and charges for cross-border payments will help boost trade between India and Singapore.
• UPI, meanwhile, has seen tremendous growth as mobile-based payments have gained traction in India.
• UPI continues to witness robust growth, with total payments growing around 109% year-on-year in July to ₹6.1 trillion.

Q) Which of the following are characteristics of Treasury Bills?

1. Short-term financial instruments
2. Widely traded on the discount market
3. Highly liquid securities
4. All of the above

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