After releasing guidelines for online payment aggregators like Razorpay and Cashfree, the Reserve Bank of India on Tuesday issued draft rules to regulate point-of-sale payment service providers (PA-P). Companies like Innoviti Payments, Pine Labs and MSwipe will be brought under regulatory cover now.
The regulator said companies providing the service will need to apply for authorisation from the RBI by May 31, 2025.
In case they fail to get authorisation, they will have to cease these services, as per the draft rules.
Classification of Merchants
Payment aggregators will have to inform the regulator about their intent to seek authorisation within 60 days from the date of issuance of formal guidelines, the RBI said.
It directed banks to close non-bank PA-Ps by October 31, 2025, unless they provide evidence of applying to RBI for authorisation.
ET had reported on May 19 that the RBI is planning to implement stricter regulations for payment aggregators.
The regulator has also suggested enhanced customer due diligence to be undertaken by payment aggregators to ensure that the right set of merchants avail of digital payment services. All PAs must become members of the Financial Intelligence Unit under the finance ministry to report any suspicious transactions. All these guidelines are applicable equally to PA-P as well as online payment aggregators (PA-O).
“These instructions (on KYC) shall be applicable three months from the date of issue of the circular,” the RBI said.
On existing merchants, it wants PAs to adhere to KYC rules by September 2025.
These guidelines assume significance in the wake of RBI’s scrutiny of the digital payments ecosystem and the level of KYC undertaken by these service providers on their merchants. Paytm Payments Bank had to face regulatory action recently because of improper KYC of its user base over the years.
For ease of operations for payment players, the central bank has suggested classification of merchants into small and medium categories. The regulator has defined small merchants as those physical merchants with turnover of less than Rs 5 lakh per annum. Medium merchants are those with a turnover beyond Rs 5 lakh but up to Rs 40 lakh per annum.
It defined a marketplace as: “An electronic commerce entity which provides an information technology platform on a digital or electronic network to facilitate transactions between buyers and sellers.”
Online payments are routed through escrow accounts, which are a form of a pass-through account used to settle digital payments. The RBI has also brought digital payments made at the time of delivery of an ecommerce purchase within the ambit of an escrow account.
The regulator also heightened security measures that PAs need to adopt around monitoring of these merchants. It said PAs need to ensure that merchants are using the services only for their proposed line of business. It has also suggested imposition of risk-based payment limits on these merchants.
