Financial switches of Bhutan and India to be integrated soon

In marking 50 years of Indo-Bhutan diplomatic relation, the Royal Monetary Authority (RMA) and Reserve Bank of India (RBI) would soon integrate Bhutan financial switch and national financial switch of India to facilitate cash-less cross border digital payment.

This means that Indian nationals visiting Bhutan would be able to use their RuPay card at more the 231 ATMs and 759 point of sales (PoS) terminals across the country. Likewise, the banks in Bhutan will issue RuPay co-branded cards that could be used in India at more than 250,000 ATMs and 210,000 PoS terminals.

The process inter-connects the ATMs and PoS between two countries, which requires the integration of two distinct payment gateways of Bhutan and India under one platform.

An Indian tourist, for example, withdraws Nu 10,000 from any ATM in Bhutan using his RuPay card. Immediately the amount would be credited in the RMA’s account maintained with the State Bank of India. Due to one-to-one fixed exchange regime with India, there are no risks involved in exchange and settlement.

This will also benefit the country in earning Indian Rupees because the integration will streamline the flow of Indian Rupees into the mainstream banking system enhancing the country’s rupee earning capacity and consequently strengthening the country’s reserve.

“The cross-border digitisation will enable proper monitoring of currency flows and improved real-time statistical records for informed decision-making and pave way for policies and strategies for regulating currency flows,” the RMA report stated.

For instance, when demonitisation was initiated in India, there were concerns on black money flowing into the country and many Bhutanese hoarding INR faced difficulty.

Following the rupee crisis and import ban in 2012, procedures to remit INR was made stringent and fake imports were made on papers to transfer INR, blemishing the trade balance and draining the INR reserve. Disparity in exchange rate was also observed across the borders.

The RMA views the integration as a solution to such issues and curb illegal transaction while helping other agencies with data and information.

However, the issue of RuPay co-branded cards for Bhutanese would be implemented in the second phase of the project making it possible for Bhutanese to use Indian ATMs and PoS.

The RMA’s annual report stated that the facility is expected to usher safe and seamless transaction without the need to rely on international cards such as Visa and MasterCard, which are expensive to use.

Usage of such international cards meant foreign currency outflow since the cards providers charge in USD for availing their services, membership, compliance and transaction costs. This, according to the RMA is leading to questions on the sustainability of the investment required to meet the costs of providing international cards in the country.

To this effect, the integration is also expected to curtail foreign currency outflow while translating into significant cost saving for the banks.

The RMA stated that it has accorded highest importance to cyber security and has even conducted an assessment towards achieving security accreditation of cyber security and information security to mitigate intrusion and threats from disrupting and damaging confidentiality.

The technology is certified by British Standard Institute and International Standards Organisation. The RMA also claims that it has implemented robust set of control mechanism including technologies, policies, processes and organisational structures to enhance customer and stakeholders’ confidence.

“Connection of this two Switches will be a new milestone in promoting a seamless payment and settlement system between India and Bhutan. This would further strengthen the economic and financial linkages between the two countries,” according to the RMA.

The project to integrate two switches was initiated in June 2017 with a cost of Nu 24.7M. The project, according to the RMA, is an “exemplary digital initiative” and if proved success, integration of financial services between trading partners in the region would be explored.

Tshering Dorji