UPI payment facility for NRIs: Remittances to India by currency exchange houses set to see big fall

India on Wednesday allowed NRIs from 10 countries, including UAE, Saudi Arabia and Oman, to use UPI to send and receive money if their bank accounts in India are linked to their phone numbers abroad.

The move is expected to dent businesses of money transfer firms in GCC and also impact businesses of banks in the region, industry insiders said.

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“Expat Indians in the UAE and other GCC countries, especially those in the middle and upper middle income group, would now start topping up their NRI accounts in Indian banks to transfer money to their relatives or other purposes, instead of transferring money through banks or remittance firms” Milind Singh, founder of Xare, a UAE-based fintech firm specialising in the borderless card sharing segment, told Arabian Business.

“Banks [in GCC] will also be impacted as the number of remittance transactions could come down significantly with expats resorting to few and large transfers instead of numerous small transfers,” Singh said.

Banks earn fee income whenever a remittance transaction is done.

Singh said India being the largest recipient of foreign remittances, the latest move will lead to changing and shaping remittances significantly.

“However, we are still far from understanding the full impact of this,” he said.

Singh, however, said many of the Indian migrant workers in the Gulf never bothered to open NRI bank accounts in India and therefore will have to continue to send money home through remittance companies.

UAE Exchange, Western Union and Lulu Exchange are among the leading money transfer ventures operating in GCC and India.

Industry executives said the announcement on UPI payment facility could lead many of these migrant workers also rushing to open bank accounts in India to take advantage of the new facility.

Expat Indians open two types of accounts in Indian banks – NRE (non-resident (external) and NRO (non-resident (ordinary) accounts.

An NRE account helps NRIs transfer foreign earnings to India, while an NRO account helps them manage the income earned in India.

The only conditions are that banks ensure such accounts are allowed according to the Foreign Exchange Management Act (FEMA) regulations, follow the guidelines of the Reserve Bank of India (RBI) and guard against money laundering or terror financing.

“This allows the diaspora to use it not just when they come to India but also when they are abroad. They can make instant transfers and use it on e-commerce portals,” said Dilip Asbe, chief executive, NPCI, the parent body of UPI.

The policy, Asbe said, will benefit lenders as well, since it will help them keep the transactions flowing in these bank accounts.

All member banks must follow the directives by 30 April.

Sandeep Ganediwalla, the Dubai-based managing partner of RedSeer Strategy Consultants, specialising in digital services sectors, said the move to allow NRIs to use UPI for payments will be a boon – both when they visit home as well as when they are in their respective resident countries.

“UPI adoption has been widespread in India but till now NRIs could not leverage UPIs. This created friction in NRIs experience when dealing with transactions in India,” Ganediwall told Arabian Business.

“Given the fact that remittance to India is estimated to cross $100 billion, NRIs are critical to the economy and opening UPI for NRIs is the next logical step,” Ganediwalla said.

There were 13.5 million Indians living abroad, as per data submitted in the Lok Sabha – India’s Lower House – in February.

Experts said NPCI’s decision will help widen an already-popular payment mechanism.

The move is also expected to expand the number of bank accounts in India linked to UPI.