Context

Recently, Maldives is set to introduce India’s RuPay service.

About RuPay

• RuPay is the first global card payment network in India.
  • It is a combination of “Rupee” and “Payment,”
• It was launched by the National Payments Corporation of India (NPCI) in 2012.
• Objective: Create a domestic, open, and multilateral payment system, fulfilling the Reserve Bank of India’s (RBI) vision.
• It is widely accepted at ATMs, POS devices, and e-commerce websites throughout India.
• RuPay enables electronic payments across all Indian banks and financial institutions.

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 Reasons behind the Maldives’ decision to adopt RuPay

• Strengthening Maldivian Rufiyaa (MVR): The Maldivian government aims  to make their currency, the Rufiyaa, stronger by using less US dollars in transactions with Indian tourists. 

• • This might make their economy more stable and could improve exchange rates.
• Boost Bilateral Trade of Maldives: Facilitating rupee transactions could streamline payments between India and the Maldives, potentially encouraging more trade between the two countries.
• Promote Tourism and economic linkages: Easier rupee transactions could incentivize Indian tourists to spend more freely in the Maldives, benefiting the Maldivian tourism industry, a major source of income for the country. 

Impact of launching India’s Rupay service on Indian economy

Positives

• Income from Transaction Fees: Indian banks that give out RuPay cards might earn money from fees when people use those cards in the Maldives, which helps banks make more money.
• Growing RuPay Network: More countries accepting RuPay means it’s becoming a bigger deal globally. 
  • This could mean more people and shops start using it in India too, which might make transactions cheaper.
• Opportunity for Indian Businesses: With Indian tourists using RuPay in the Maldives, more people there might start using Indian websites or services that accept RuPay. This could create new markets for Indian businesses.

Negatives

• Data Security Concerns: Inadequate protection of RuPay transactions in the Maldives could lead to data breaches or fraud affecting Indian cardholders. Therefore, there is a need for strong security. 
• Uncertain Regulatory Environment: Unclear or changing regulations in the Maldives could disrupt RuPay operations which could be an inconvenience for Indian tourists and businesses.
• Dependence on Maldives Implementation: The success of RuPay in the Maldives depends on Its effective implementation by Maldives
  • Any delays or issues in the rollout could limit the benefits.

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