Daily News Analysis » April 2024 » RBI Draft Rules for Payment Aggregators: 26 April 2024

RBI Draft Rules for Payment Aggregators: 26 April 2024


  • Two consultation papers were released earlier this month by the Reserve Bank of India (RBI) in an effort to improve regulation of offline Payment Aggregators (PAs).
  • The first focuses on the operations of offline PAs.
  • The second suggests enhancing the safety of the ecosystem by extending the guidelines for Know Your Customer (KYC), onboarding merchant due diligence, and escrow account operations.

RBI Draft Rules:

  • The existing guidelines cover their activities in e-commerce sites and other online avenues.
  • According to the latest draft norms, these rules would also apply to offline settings where there would need to be in-person interactions.
  • RBI wants to improve the coordination of rules governing PA operations and activities.

Registration with RBI:

  • Banks providing physical PA services as part of their normal banking relationship would not require any separate authorisation from the RBI.
  • It is expected that they will adhere to the updated guidelines within three months following their issuance.
  • PAs, providing online / offline services, would have to inform RBI within 60 days (after the circular is issued), about their intent to seek authorisation. 

Sustainability provisions:

  • The RBI proposes that non-banking entities currently providing face-to-face transaction services have a minimum net worth of ₹15 crore when they apply. 
  • This would be extended to ₹25 crore by March 31, 2028. 
  • The requirements are the same for new applicants.
  • Existing offline operators unable to comply with the approval-seeking timeframe have to wind up their operations by July 31, 2025. 

KYC Requirements:

  • The regulations aim to ensure that onboarded merchants do not collect and settle funds for services not offered on their platforms. 
  • The RBI’s proposed instructions categorize merchants into small and medium merchants.
  • Small merchants: would constitute physical merchants with an annual business turnover of less than ₹5 lakh who are not registered under the GST regime
  • Medium merchants: defined as physical or online merchants with annual business turnover of less than ₹40 lakhs who are not registered under the GST, would also have to undergo contact point verification. 

Data Privacy:

  • No entity, other than the card issuer and/or card network, can store data for face-to-face payments from August 1, 2025, and direct them to remove data stored previously. 
  • Entities would be allowed to store limited data, the last four digits of the card number and the issuer’s name.   
  • The responsibility for compliance  would also be on card networks.         

Why in news?

This article is based on a recent publication of The Hindu, Text and Context section.