ADB Highlights Digital Payment Link Between Nepal And India For Economic Growth

The Asian Development Bank (ADB) has identified the Nepal-India digital payment corridor as a major opportunity to strengthen trade, tourism, and remittance flows between the two neighbouring countries. In its latest report, "Advancing Digital Payments in Nepal: Infrastructure Upgrades and Policy Development for Enhanced Trade Facilitation," the Manila-based lender said that billions of dollars move annually between Nepal and India through commerce and remittances, but a large share of transactions still depend on traditional banking channels despite advances in digital payment technology.

The ADB report highlighted that stronger digital payment connectivity between Nepal and India could create significant benefits for businesses and consumers by improving transaction efficiency and reducing barriers in cross-border financial activities. It recommended greater cooperation between both countries in areas such as payment infrastructure development, regulatory coordination, system interoperability, and market integration to create a more effective digital payment ecosystem.

Progress has already been made toward linking the digital payment systems of both countries. In 2024, Nepal Rastra Bank and the Reserve Bank of India signed regulatory terms of reference to support the integration of Nepal's National Payments Interface with India's Unified Payments Interface (UPI). Since March 2024, Indian travellers visiting Nepal have been able to make QR-based payments at merchants using systems provided by Nepal's digital payment platforms, including Fonepay and Khalti.

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According to the ADB report, the QR payment initiative has recorded steady growth, with daily transactions increasing from around 500 at the time of launch to approximately 2,000 by early 2025. The total daily transaction value reached about NPR 6 million, while cumulative transactions crossed NPR 1.6 billion. Nepal's NEPALPAY QR system, developed by Nepal Clearing House Limited under the guidance of the central bank, has also expanded access for tourists from countries including China, Italy, South Korea, Malaysia, and Singapore.

However, the report noted that full two-way payment integration remains incomplete, as Nepali users are still unable to make QR payments in India due to unresolved issues related to commission structures. While Indian users can make QR payments in Nepal with a standard transaction charge, differences between India's largely free QR payment model and Nepal's banking commission requirements have delayed reciprocal services. The ADB has urged both countries to resolve these challenges to enable smoother cross-border digital transactions.

The report also highlighted recent efforts to improve financial connectivity through direct online fund transfers between Nepal and India. A cross-border remittance service launched in early June allows customers to transfer money directly between bank accounts in both countries. The ADB has recommended adopting a UPI-like payment framework to simplify transactions with India, Nepal's largest trading partner, and reduce inefficiencies in bilateral trade payments while supporting deeper economic integration.

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