India has asked the Financial Action Task Force (FATF), the global watchdog on money laundering, to relax compliance requirements for cross‑border payments processed through its domestic system. This move is aimed at streamlining international transactions and enhancing the efficiency of India's payment ecosystem, Reuters reported.
According to the article, compliance hurdles for smaller players have hindered the Centre's efforts to expand UPI‑based cross‑border payments. In contrast, established networks like SWIFT, Visa and MasterCard are not subject to these regulations, and the current form of worldwide anti‑money laundering rules tends to favor them. Sources have therefore called for a reassessment of these regulations.
Additionally, without explicitly naming UPI, RBI Governor Sanjay Malhotra reportedly told FATF meeting attendees that "it would be desirable to make the (FATF's) travel rule technology‑neutral."
Launched in 2016, the Unified Payment Interface (UPI) is projected to account for 83% of India's digital payment volume in 2024, up from 34% in 2019, cementing its dominance in the domestic retail payments sector. The government now aims to encourage Indians travelling overseas to use its own payments network more frequently, tapping into a growing market and boosting the competitiveness of the global cross‑border payments sector.
The FATF's "travel rule" mandates that financial institutions collect, store and communicate details about both the originator and recipient of cross‑border transfers. The watchdog is currently conducting a public consultation on the rule, open for feedback until April 18. A final decision on India's request will depend on achieving consensus among FATF member countries after the consultation period.
UPI MDR Issue
Following heavy lobbying by banks and fintech firms, Prime Minister Narendra Modi's government is considering re‑introducing merchant charges commonly known as the Merchant Discount Rate (MDR) on certain UPI‑based transactions and Rupay‑powered debit card transactions.
According to an Economic Times report citing bankers, the proposal, put forward by lenders, seeks to impose MDR on merchants with a GST‑based annual revenue of more than Rs 40 lakh. MDR is a fee that retailers pay to banks and payment service providers, such as Razorpay, to process transactions.
Currently, UPI payments do not carry an MDR, while debit card transactions typically incur a fee of 0.75% and credit card transactions are charged roughly 1.75% per transaction.
