Prime Minister Narendra Modi on Friday said that India and Sri Lanka have agreed on usage of Unified Payments Interface (UPI) mechanism. The agreement signed to launch UPI in Sri Lanka will increase fintech connectivity, PM Modi said during joint address with Sri Lanka President Ranil Wickremesinghe.

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Wickremesinghe on Thursday kicked off a two-day visit to India. It is the first visit to India by a Sri Lankan leader since the island nation reeled under a severe economic crisis last year.

Commenting on the development, Satyajeet Kunjeer, Founder and CEO at Deciml said, "UPI continues to be the preferred mode of payment in India and there could be potential for similar impact in Sri Lanka as well."

"India wants to play a larger role in the global economic landscape and taking indigenous innovations like the UPI to different countries ( Singapore, Middle East, France and now Sri Lanka) is a very effective way to demonstrate this desire and also have soft power," Vivek Iyer, Partner at Grant Thornton Bhar told CNBC-TV18.com.

According to Anup Nayar, CEO- Domestic, In- solutions global ltd, Sri Lanka can expect to experience increased convenience, security, and efficiency in its financial transactions by embracing UPI, paving the way for a more modern and interconnected economy in the region.

The decision on UPI comes days after India and France signed a similar agreement on UPI. Enabling UPI payments in France means Indian tourists would now be able to make payments in France in rupee through UPI. It will be started from Eiffel Tower. In other others, Indians visiting Europe will be able to use their UPI app to make their payments in France in the rupee using local QR or UPI ID.

UPI and Singapore’s PayNow also signed an agreement earlier this year, allowing users in either country to make cross-border transactions. The UAE, Bhutan, and Nepal have already adopted the UPI payment system. National Payments Corporation of India (NPCI) is reportedly also in talks with other countries in the USA, Europe and West Asia to extend UPI services.

UPI is an instant real-time payment system developed by National Payments Corporation of India (NPCI). The interface facilitates inter-bank peer-to-peer and person-to-merchant transactions. According to Reserve Bank of India (RBI) data, UPI transactions stood at Rs 139.2 lakh crore in FY23 or about 73 percent of all non-cash transactions in India in 2022.