In a major step toward deepening financial connectivity between India and Europe, the Reserve Bank of India (RBI) and the European Central Bank (ECB) have agreed to begin the realisation phase for linking India’s Unified Payments Interface (UPI) with Europe’s TARGET Instant Payment Settlement (TIPS) system. The move marks a crucial advancement in India’s ongoing strategy to internationalise UPI and make cross-border transactions faster, more secure, and more affordable.

The development follows extensive consultations and an initial exploratory phase between the two central banks. With the transition into the realisation phase, both sides will now focus on the technical, regulatory, and settlement-related preparations required to establish a fully functional payments corridor connecting India with the European Union.

The RBI, along with its international subsidiary NPCI International Payments Limited (NIPL), will continue to work closely with the ECB to operationalise the linkage. The collaboration will involve detailed work on technical integration, risk management frameworks, settlement mechanisms, interoperability standards, and cross-jurisdictional regulatory compliance.

Experts view the UPI–TIPS linkage as a transformative initiative that could significantly change the landscape of cross-border payments between India and Europe.

Why the UPI–TIPS Link Matters

The planned linkage will connect India’s UPI, which handles billions of transactions per month, with TIPS, the real-time payment infrastructure operated by the Eurosystem. TIPS allows banks, payment service providers, and financial institutions across the EU to send and receive instant payments around the clock.

With UPI emerging as one of the world’s most advanced and inclusive digital payment systems, and TIPS serving as the backbone for instant payments within the EU, their interconnection could generate significant benefits:

1. Instant Cross-Border Payments

Traditionally, remittances between India and Europe involve:

• high fees,

• slow settlement cycles,

• reliance on correspondent banking networks, and

• lack of transparency for users.

A direct UPI–TIPS link could enable real-time settlement, dramatically reducing waiting times and improving reliability.

2. Reduced Transaction Costs

Cross-border payments typically incur fees ranging from 3% to 8%, depending on the route and provider. Linking UPI with TIPS could compress costs substantially by bypassing intermediaries.

3. Wider Access and Convenience

Millions of Indian professionals, students, and tourists in Europe could benefit from seamless and low-cost payment options. European businesses dealing with Indian partners could also gain from faster settlement.

4. Boost to Trade and Investment

Simplifying payment flows enhances bilateral trade, investment, and financial flows, supporting stronger India-EU economic ties.

5. Advancement of India’s Digital Public Infrastructure (DPI) Diplomacy

India has been actively promoting UPI as part of its global digital public goods outreach, using it to deepen technological and economic cooperation.

The Realisation Phase: What It Involves

Entering the realisation phase signifies that both central banks have agreed that the preliminary assessments, feasibility studies, and initial consultations have established a green light for deeper implementation work.

This phase will involve:

1. Technical Integration

System-level compatibility must be established between UPI and TIPS. This includes:

• APIs

• messaging formats

• real-time processing protocols

• authentication and encryption standards

• integration testing frameworks

Ensuring seamless, instant communication between India’s payment rails and the EU's settlement infrastructure is central to this stage.

2. Regulatory and Compliance Synchronisation

Cross-border payment systems must align on:

• anti-money laundering (AML) guidelines

• combating financing of terrorism (CFT) standards

• Know Your Customer (KYC) norms

• data-protection rules (especially EU GDPR)

The RBI and ECB will work with payment service providers to ensure compliance across jurisdictions.

3. Settlement and Liquidity Arrangements

The settlement mechanism for transactions routed through UPI and settled via TIPS needs careful design to ensure:

• real-time settlement finality

• adequate liquidity buffers

• currency conversion processes

• settlement risk mitigation

These frameworks are pivotal to preventing delays, disputes, or liquidity crunches.

4. Risk Management Structure

Central banks must protect the system from operational, cyber, liquidity, and systemic risks. The risk protocols will be jointly framed to maintain the integrity of the cross-border payment corridor.

5. Pilot Testing and Phased Rollout

Once the infrastructure is aligned, the RBI and ECB are expected to conduct pilot tests involving selected banks and payment service providers before enabling broader public access.

India’s Push for Internationalising UPI

The UPI–TIPS agreement is part of a broader series of steps India has taken to promote UPI globally. Over the past few years, NIPL has partnered with governments, payment networks, and fintech operators in several regions, including:

• Singapore (PayNow–UPI linkage operational)

• UAE (UPI acceptance at merchant outlets)

• France (UPI accepted at the Eiffel Tower and across merchants)

• Nepal (UPI-powered digital payments)

• Sri Lanka and Mauritius (UPI introduced for inbound payments)

• Oman, Qatar, Bahrain (progress towards integration)

Linking UPI with TIPS marks the most ambitious expansion yet, connecting India with one of the world’s largest financial and economic blocs.

A New Payments Corridor for a New Era

NIPL officials note that connecting UPI with TIPS is a natural extension of India’s strategy to make digital payments a global public good. By enabling interoperable payment layers, India aims to replicate domestically successful models across international corridors.

For Europe, linking with India—one of the world’s largest remittance markets and home to a massive diaspora—could position TIPS as a competitive global payments infrastructure.

Experts argue that such a partnership reflects the growing convergence between India and Europe on digital cooperation, fintech policy, cybersecurity protocols, and technological governance.

Impact on Individuals and Businesses

For Indian Students and Workers in Europe

The link could allow them to send money back home instantly through their bank apps or UPI applications.

For European Travellers and Companies

Businesses may receive payments from Indian partners in near real-time, improving transaction efficiency.

For MSMEs and Exporters

Faster settlement cycles enhance liquidity management and reduce financial uncertainty.

Broader Geopolitical Significance

The partnership also aligns with global efforts to create alternative cross-border payment mechanisms that are more efficient than traditional systems like SWIFT. While the UPI–TIPS linkage is not a replacement for SWIFT, it adds a new layer of real-time transaction capability.

Additionally, the move strengthens the India-EU strategic partnership at a time when global geopolitics is shifting toward multi-polar digital ecosystems.

Challenges and Areas of Caution

Despite the promise, experts flag several challenges:

• ensuring GDPR-compliant data flows

• managing currency conversion and FX volatility

• harmonising AML and KYC standards across jurisdictions

• ensuring that European banks adopt and integrate India-linked solutions

• cyber-security protections for increased transaction volumes

The success of the linkage will depend on how effectively RBI, ECB, NIPL, and European payment operators navigate these issues.

Join our Telegram Channel for Latest News and Regular Updates.

Start your Mutual Fund Journey  by Opening Free Account in Asset Plus.

Start your Stock Market Journey and Apply in IPO by Opening Free Demat Account in Choice Broking FinX.