India Pitches FATF To Relax Rules For UPI’s Growth

The Centre has reportedly urged money laundering watchdog Financial Action Task Force (FATF) to relax compliance mandates for cross-border payments via Unified Payments Interface (UPI). 

News agency Reuters, citing sources, reported that Indian officials raised the matter at an FATF conference in Mumbai earlier this week. 

As per the report, the sources said that the Centre’s plans for the expansion of UPI cross-border payments have been hindered by compliance requirements for “smaller players”. They highlighted that SWIFT (a secure messaging network facilitating global financial transactions) and payment networks like Visa and Mastercard are exempted from such rules. 

Noting that global anti-money laundering rules “in their current form” favour the two payment networks and the messaging service, the sources called for a review of the anti-money laundering rules. 

Without specifically mentioning UPI, RBI governor Sanjay Malhotra is said to have told the attendees of the FATF meeting that “it would be desirable to make the (FATF’s) travel rule technology-neutral”.

For context, FATF’s “travel rule” mandates financial institutions to collect, hold, and transmit information about the sender and receiver of cross-border payments. 

The watchdog is holding public consultation on the rule, which is open for feedback till April 18. A final decision on India’s request would depend on achieving a consensus among FATF member countries post the consultation period. 

India’s Ambitions To Take UPI Global

With its push for reviewing the travel rule, the Centre wants to clear all decks for the expansion of UPI offerings and take the homegrown payments network global. The government also wants to increase the use of UPI by Indians travelling abroad and tap into the growing cross-border payments space. 

India’s pitch would put UPI in direct competition with Visa and Mastercard. The new networks have sparred with the Indian government earlier as well over the latter’s push for homegrown financial offerings. 

In 2021, Visa complained to the US government that India’s “informal and formal” promotion of payments service RuPay hurt its presence in the country and “scuffled” the level playing field. 

In 2018, Mastercard, too, raised similar concerns with the US government, saying that Prime Minister (PM) Narendra Modi was using nationalism to promote RuPay.

Meanwhile, the Centre’s push to review FATF’s rules comes at a time when UPI continues to scale up rapidly. As per the National Payments Corporation of India (NPCI), UPI clocked 1,611 Cr transactions worth INR 21.96 Lakh Cr in February as against 1,699 Cr transactions worth INR 23.48 Lakh Cr in January. 

The payments body also set up a subsidiary, NPCI International Payments Limited (NIPL), to take the payments system global. As part of this, the RBI and the NIPL have signed agreements with seven nations, including France and Singapore, to enable merchants in the countries to accept payments via the UPI.

Earlier this month, India’s ambassador to Qatar said that UPI is set for a “full rollout” in the Middle Eastern nation “soon”. Previously, the RBI also signed pacts with central banks of Malaysia, Philippines, Singapore, and Thailand to launch ‘Project Nexus’ to link UPI with their fast payment systems to enable cross-border payments.

In recent months, the central bank has also granted licences to startups like Cashfree and Skydo to offer cross-border payments to fuel the growth in the fintech segment.