Draft guidelines of RBI for the Payment Aggregators (PA) regarding KYC, due diligence, escrow account operations, etc., were published on 16th April 2024. Have a look at these draft guidelines and let us know your opinions:

What New Guidelines Did RBI Propose for Payment Aggregators?

In the draft guidelines for payment aggregators, RBI has touched on the following areas – check out the new norms for each area:

1. Due Diligence Related Guidelines

RBI has proposed that the payment aggregators should undertake Customer Due Diligence of the merchants they onboard by 30th September 2025 as per the Master Directions on Know Your Customer (MD-KYC), 2016. The payment aggregators must verify the Contact Point Verification (CPV) and bank account where funds are settled for small and medium-sized merchants.

In addition, payment aggregators have to verify at least one Officially Valid Document (OVD) of the proprietor, beneficial owner, or person holding attorney. In short, payment aggregators need to verify the merchant's identity and monitor the transaction activities.

Specifications of Small & Medium Sized Merchants

RBI specified merchants with annual turnover of or less than

• INR 5 lacs (not registered under GST rules) as ‘Small Merchants’ (undertakes only proximity or face-to-face transactions)
• INR 40 lacs (not registered under GST rules) as 'Medium Merchants' (undertakes both physical and online transactions)

At the same time, PAs must ensure that the marketplaces they onboarded do not collect or settle funds for services not offered through their platforms.

Card Transactions

There are also some new rules regarding face-to-face or proximity transactions using cards. RBI suggested that only the card issuer and card network can store card-on-file (COF) data—no one other than these two can store any vital card data. They have to remove everything stored previously. For transaction tracking or reconciliation purposes, other entities can store only minimum data like the last four digits of the card, the card holder's name, etc.

Further Guidelines for Bank and Non-bank Payment Aggregator

The banks offering physical payment aggregator services must provide evidence that they comply with the regulations by 16th July 2024. Non-bank payment aggregators, too, must get a permit in the form of RBI’s authorization within 60 days of this draft.

Also, non-bank payment aggregators that intend to serve as physical aggregators should first get a clearance from the Department of Payment and Settlement Systems (DPSS) and RBI before starting.

2. Net-worth related guidelines

It is also mentioned that the non-bank payment aggregators must complete their registration with the Financial Intelligence Unit – India (FIU IND). They have to supply the requested information. Furthermore, the new and existing non-bank payment aggregators should reach INR 15 crore net worth at the time of submitting the authorization application to RBI; however, the limit will become INR 25 crore by 31st March 2028 for existing non-bank PAs – New ones have to achieve this net-worth by the 3rd financial year after their authorization is granted. They have to maintain the net worth of INR 25 crore after that.

All the non-bank Payment Aggregators – physical Point of Sale (PA-P) who fail to meet this requirement or apply for authorization within the deadline must wind up their PA-P activities by July 31, 2025. Not only that but the banks are also asked to close the accounts used for PA activities by 31st October 2025 unless the PAs submit authorization applications to RBI.

Also, read: RBI Drafts New Rules on Digital Payment Methods for More Safety

3. Escrow Account Related Guidelines

Before this, only payment aggregators online point-of-sale (PA-O) were under RBI regulations. With the new draft guidelines, RBI aims to streamline the collection of PA-Ps. The escrow accounts can now be utilised for both PA-O and PA-P activities.

Click here to check the complete draft rules

Reactions to RBI’s Draft Guidelines

Experts believe that right now, it may seem problematic to complete authorization and increase the net worth by the deadline. However, in the long run, every single guideline will be beneficial. It may impact the fintech business model and point of sale operators as both will come under direct RBI regulations. But, shortly, we can expect that these guidelines will

• 1. Increase the digital trust
• 2. Strengthen the payment ecosystem
• 3. Bring forth more ethical practices

Purpose of Draft Guidelines of RBI for Payment Aggregators

The prime reason behind these new guidelines is the drastic growth in digital transactions in the last few years. These guidelines aim to offer a more significant role to PAs. With these new guidelines, payment aggregators can also manage the risks on their platform.

Experts opined that the regulations for PA-Ps will slowly but surely blur the differences between PA-O and PA-Ps.

Also, read: Payment Gateway Vs. Payment Aggregator Know the difference

End Words

RBI's new guidelines are in the draft stage, and payment aggregators must follow them only after implementation. RBI asked stakeholders for comments on these proposed norms; RBI will take final decisions once comments come in.

Integrate PayG Payment Gateway and Accept Payments through UPI, Cards, Net-Banking, Wallets, etc.