Spice Route Legal
Reserve Bank of India (Regulation of Payment Aggregators) Directions, 2025
The Reserve Bank of India (“RBI”) has released the consolidated Master Directions on Regulation of Payment Aggregators (“Directions“), introducing a unified framework governing Payment Aggregator – Online (“PA-O”), Payment Aggregator – Physical (“PA-P”), and Payment Aggregator – Cross Border (“PA-CB”). While the Directions are applicable to both bank and non-bank payment aggregators (“PAs”), banks do not require an authorisation to carry out PA business.
Actions and Timelines:
| Sr. No. | Scenario | Action Required | Timeline/Deadline |
|---|---|---|---|
| 1. | PA with Certificate of Authorisation (“CoA”), already operating as PA-P | Intimate RBI | No specific date; to be done promptly |
| Revised CoA will be issued | – | ||
| 2. | PA with CoA, planning to start new PA category | Notify RBI at least 30 days before starting new PA category | Minimum 30 days prior |
| 3. | PA with application under review for PA-O or PA-CB, and already operating as PA-P | Intimate RBI about existing PA-P business via online portal | By December 31, 2025 |
| 4. | Entity operating only as PA-P (without CoA) | Apply for authorisation | By December 31, 2025 |
| If not applying: Intimate banker(s) and cease business | By February 28, 2026 |
Key highlights:
1. Regulation of PA-Ps: The Directions now regulate PA-Ps, i.e., payment aggregators that facilitate transaction(s) where both the acceptance device and payment instrument are physically present in close proximity while making the transaction.
2. Definition of Payment Aggregators: PAs are now explicitly permitted to handle payments for investment products (not just goods and services). However, ambiguity remains around use-cases that do not specifically fall under these categories, for instance, crowdfunding, loan disbursals, etc.
3. PA-P v. PA-O: The definitions are clearer than the proposal under the draft directions, differentiating between a PA-P and PA-O only based on whether a transaction is undertaken in proximity or not (without any reference to delivery versus payment (DvP) transactions).
4. Prohibition on PAs undertaking marketplace business: The Directions clarify that a PA business cannot carry out marketplace business. This restriction may compel many entities to restructure their business offerings. Additionally, while a PA can onboard marketplaces as merchants, it is required to ensure that the marketplace does not accept payments for a seller not onboarded on the marketplace’s platform.
5. Criteria for aggregation: A PA can only aggregate funds for such merchants with whom it has a contractual relationship. This will impact use-cases like aggregation of funds for rent payments.
6. Third-Party Settlements: Contrary to earlier proposals to prohibit third-party settlements completely, these are now permitted but significantly restricted. Payment to third parties can be undertaken for merchants with an annual turnover above INR 40,00,000 (Rupees Forty Lakh) or an annual export turnover of more than INR 5,00,000 (Rupees Five Lakh) and can be undertaken only for such payee that interfaces with the payer for the underlying transaction. This will impact the split-settlement use case widely.
7. KYC: PAs are now required to comply with the Reserve Bank of India (Know Your Customer (KYC)) Directions, 2016 (“KYC Master Directions”), as opposed to complying with this previously only in such cases where the PA maintained an account-based relationship with the merchant. The Directions promote Central KYC Registry (CKYCR) as the primary mode of conducting KYC. The RBI has also provided an alternative mechanism that can be followed for smaller merchants.
8. Acquiring Banks: Acquiring banks are now explicitly exempted from undertaking customer due diligence (CDD) on merchants onboarded by PAs. This significantly reduces duplication of KYC efforts and streamlines onboarding.
9. Merchant fund monitoring obligation: PAs are now expected to monitor merchants’ transactions to ensure alignment with the merchant’s profile. This creates a new compliance layer, and PAs will need to be develop implementation mechanisms, specifically for merchants with significant transaction volumes.
10. Multi-PA Transactions: The Directions clarify the due diligence obligations when multiple PAs are involved in a single transaction. The PA that directly onboards the merchant is responsible for conducting merchant due diligence, even if another PA is involved in the transaction flow.
11. Inter-PA transfers: Following on the above point, the permissible credits and debits now explicitly recognise inter-PA transfers.
12. Structuring of part domestic and part international transactions: The Directions mark a shift while outlining the role of a PA-CB. The framework is centered around inward and outward cross- border payments as opposed to import/export framework. This will play a critical role in structuring transactions that span both domestic and international elements.
Recent Publications
This website is owned and operated by Spice Route Legal, and is exclusively meant to be a source of information on the firm, it’s practice areas, and its members.
It is not intended and should not be construed as any form of advertisement, solicitation, invitation or inducement of any sort from the firm or its members.
Spice Route Legal does not warrant that any information provided on the website is accurate, complete or updated, and further denies liability for any and all loss or damage caused to the user as a result of their reliance on the content provided.
The information made available on this site must in no way be relied upon, or construed, as legal advice. If you need legal assistance, we recommend you seek help from competent counsel licensed to practice and advise in the relevant jurisdiction.