Senior officials of the RBI and the National Payments Corporation of India (NPCI) have made a presentation to the WTO members on reducing cost of remittances on March 25, an official said.
India is pressing for the adoption of open and inter-operable payment systems like UPI, among WTO (World Trade Organisation) members with a view to cut the cost of money transfers or remittances.
To cut the cost, India is suggesting to encourage digital transfers, fostering inter-operable systems, promoting competition, streamlining regulations, and enhancing pricing transparency.
A proposal in this regard was pushed by India in the 13th ministerial conference, which was held in February in Abu Dhabi.
“We had requested to make a presentation on the cost of remittances. The RBI and the NPCI gave presentations online on March 25. The meetings will continue on the subject at Geneva,” the official said.
The remittance costs are about 6.18 per cent globally which is well above the United Nation’s target of 3 per cent.
“We have told the WTO members that this cost is high. Our expatriates are large in number. Remittances are a major component in balance of payment and it is an important source of income.
“India has developed digital public infrastructure like UPI. Through mobile phones, payments are now easy and cheap,” the official said.
The official said that banks and clearing houses impose high charges on these remittances.
“Our demand is that there should be a better understanding between countries and banks so that charges are imposed on one side only, that is 3 per cent. Double taxation is never a good idea for trade,” the official said.
Though a large number of WTO member countries are supporting India’s proposal, the US and Switzerland are opposing because they have “big banks and they get huge earnings through these charges,” the official said.
In the 13th ministerial conference, these two nations vetoed India’s proposal, and said they need to examine it further.
“We have been making our case. We have submitted a paper also,” the official, who did not wish to be named, said.
Cross-border remittances have significant contribution towards socio-economic development of households and communities especially in developing countries, including poor nations.
Out of total remittances of USD 860 billion in 2023, USD 669 billion (about 78 per cent) went to low and middle income countries.
Cross-border payments and money transmission service is a critical financial service used by the sender and receivers for cross-border remittances, thus providing a point of contact with the financial sector that can be leveraged to increase access to other financial services, achieve financial inclusion and enhance participation in financial services trade.
“In view of the close relationship between such services and sustainable development, we underline the need to reduce the cost of cross-border remittances. We reaffirm our commitment to the UN SDG (sustainable development goal) to reduce to less than 3 per cent the transaction costs of remittances and eliminate remittance corridors with costs higher than 5 per cent by 2030,” according to a WTO’s draft ministerial declaration on facilitating cross-border remittances.
It said that the Ministerial Conference instructs the Committee on Trade in Financial Services to undertake a work programme consisting of efforts to understand the development impact of cross-border remittances; review the cost of cross-border remittances, trends and developments; consider how technology, emergence of new market players, different types of providers and new channels, and consumer behaviour are impacting the cross-border remittance services; and examine the drivers of cost of cross-border remittances and challenges associated with reducing it.
