RBI Issues New Master Directions For Payment Aggregators

The Reserve Bank of India (RBI) on Monday (September 15) issued new master directions to regulate payment aggregators (PAs) in the country.

Called Reserve Bank of India (Regulation of Payment Aggregators) Directions, 2025, the rules create a single comprehensive framework for companies that handle digital transactions. The rules come into effect immediately.

The biggest takeaway from the new rules is the formal categorisation of payment aggregators into three distinct groups to regulate their specific activities:

PA-O (Online): Regulates aggregators facilitating ecommerce transactions and other online payments. Also defined as a transaction where the acceptance device and payment instrument aren’t in proximity

PA-P (Physical): Facilitates transactions where both the acceptance device and payment instrument are physically present in close proximity

PA-CB (Cross-Border): Establishes specific rules for aggregators that handle cross-border transactions. Sub-categorised into two aggregators – those facilitating inward or outward transactions

New Mandates For PAs

Drawing a clear distinction between banks and non-banks, the new master directions allow banks to continue running their PA businesses without fresh approval. However, non-bank players, which include all startups, will have to apply for fresh authorisation by December 31.

Those failing to comply with the norms will have to wind up their operations by February 28, 2026.

However, to qualify as a payment aggregator under the new regime, applicants will have to fulfil the following criteria:

• Minimum net worth of INR 15 Cr at the time of tendering application
• Attain a minimum net worth of INR 25 Cr by the end of third financial year of the grant of authorisation
• The net worth threshold shall be maintained by a PA on an ongoing basis
• Companies, which have received foreign direct investment (FDI), will also be guided by FEMA norms
• Submit a certificate from a statutory auditor evidencing compliance with the applicable net worth requirement

RBI Tightens Governance Guardrails

To improve corporate governance and accountability, the RBI has now directed the PAs to conduct comprehensive due diligence on merchants to prevent fraudulent activities and ensure the latter are not selling prohibited products.

Under this, payment aggregators will now have to undertake KYC verification (or PAN verification for merchants with annual turnover less than INR 40 Lakhs and annual export turnover less than INR 5 Lakh) and background check of merchants. The onus will also be on the payment aggregator to monitor transactions undertaken by the merchants.

The PAs have also been mandated to appoint an officer to address issues raised by merchants, and build a strong risk management system to address fraud and ensure customer protection. Besides, the companies will also be required to build infrastructure and policies to mitigate data safety risks, and comply with local data storage norms.

Non-bank PAs will also be required to register themselves with the Financial Intelligence Unit-India (FIU-IND) and meet the nodal body’s reporting requirements. The payment aggregators will also be required to establish a clear and effective dispute resolution mechanism to handle transaction-related issues

The new rules also underline specific directions applicable to cross border payment aggregators. Major ones are:

• Funds related to inward and outward transactions shall be kept separate and no co-mingling of funds is permitted
• A PA-CB may directly onboard merchants located abroad or entities providing PA services abroad for outward transactions
• Outward transactions can be carried out using any authorised payment method, except small prepaid payment instrument (PPI)
• PA-CBs will be barred from purchasing or selling foreign currency to any entity, except an authorised dealer
• Maximum value per transaction has been set at INR 25 Lakhs for inward or outward payments processed by a PA-CB

Escrow Account Management

To protect the funds collected from customers, the new norms also lay down strict rules for managing escrow accounts. These include keeping funds in an escrow account with a scheduled commercial bank, segregation of the money collected from merchants from the PA’s own corporate funds.

The directions also specify the maximum timeline (usually T+1, where T is the transaction date) by which the PA must settle the funds to the merchant’s account.

RBI has also prescribed strict rules on permitted credits and debits. Only the core portion of domestic escrow balances is eligible to earn interest, while cross-border escrow balances cannot earn interest. The central bank also emphasised that Escrow accounts also cannot be used for cash-on-delivery transactions.

Simultaneously, RBI has reiterated that a PA’s agreement with a merchant should disclose all applicable charges, including the merchant discount rate (MDR), set-up fees, maintenance charges, and any other fees to ensure transparency.

The new master directions come more than a year after the RBI, in April 2024, released draft rules for consultation, which proposed bringing offline PAs under its ambit, The proposed rules also suggested tighter rules on merchant due diligence, KYC, and escrow management.

Subsequently, the central received feedback from existing PAs, industry associations and law firms. “The inputs received were examined and suitably incorporated in the (latest) directions,” added the RBI.

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