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Draft Directions on Regulation of Payment Aggregators (PAs)

Reserve Bank of India (RBI) has issued draft amendments to the existing directions on Payment Aggregators and new draft directions on regulation of Payment Aggregators – Physical Point of Sale.

Existing directions on Payment Aggregators (PAs)

The existing directions on Payment Aggregators (PAs) regulate the PAs facilitating online payment transactions. 

What are the requirements for authorisation as PA?

  • Banks provide PA services as part of their normal banking relationship and do not require a separate authorisation from RBI. 
  • Non-bank PAs shall require authorisation from RBI under the Payment and Settlement Systems Act, 2007 (PSSA).

Draft amendments to the existing directions on Payment Aggregators (PAs)

The draft amendments to some of the existing directions are given below.

Who are Payment Aggregators (PAs)?

Existing Definition Amended (draft) Definition
PAs are entities that facilitate e-commerce sites and merchants to accept various payment instruments from the customers for completion of their payment obligations without the need for merchants to create a separate payment integration system of their own. PAs facilitate merchants to connect with acquirers. In the process, they receive payments from customers, pool and transfer them on to the merchants after a time period. PAs are entities which on-board merchants and facilitate aggregation of payments made by customers to such merchants, for purchase of goods and services, using one or more payment channels, in online or physical Point of Sale payment modes through a merchant’s interface (physical or virtual), and subsequently settle the collected funds to such merchants. The PAs are categorised as –
  • Online PAs (PA – O) – PAs which facilitate e-commerce transactions in non-Delivery versus Payment mode.
  • PA – physical Point-of-Sale (PA – P) – PAs which facilitate face-to-face / proximity payment for Delivery versus Payment (DvP) transactions.

Who are merchants?

The merchants are entities which sell / provide goods and services purchased by the customer. They include a marketplace also.

The merchants are categorised as –

  • Small merchants – Physical merchants (those undertaking only proximity / face-to-face transactions) with business turnover less than the threshold limit of ₹5 lakh per annum and not registered under Goods and Services Tax.
  • Medium merchants – Merchants (physical / online), excluding small merchants, with business turnover less than the threshold limit of ₹40 lakh per annum and not registered under Goods and Services Tax.

What is marketplace?

The marketplace is an electronic commerce entity which provides an information technology platform on a digital or electronic network to facilitate transactions between buyers and sellers.

What are the net-worth requirements for PAs?

Existing net-worth requirements Amended (draft) net-worth requirements
Existing PAs – ₹25 crore
New PAs –
  • At the time of application to RBI for authorisation – ₹15 crore
  • By the end of 3rd financial year of grant of authorisation – ₹25 crore
 The required net-worth of PAs shall be maintained on an on-going basis.

What are the amendments (draft) to directions on Escrow accounts of PAs?

  • The escrow account opened by the PA can be used for both PA-O and PA-P activities.
  • Funds in respect of DvP transactions shall be routed through the escrow accounts. DvP transactions entail payment for goods / services at the time of their delivery.
  • Cash-on-delivery transactions are outside the scope of the RBI directions on PAs. Accordingly, such transactions shall not be routed through the escrow accounts.
  • The existing directions that permits debit to escrow account for “payment to any other account on specific directions from the merchant”, stands deleted with immediate effect.

What are the timelines for completion of due diligence of merchants?

PAs shall ensure that they have completed the due diligence of their existing merchants in accordance with the following timelines –

Percentage Contribution to Gross Processing Value (GPV) of merchants whose due diligence has been completed Timeline for existing PAs (authorised or whose application is pending with RBI) Timeline for existing PA – P
50% December 31, 2024 3 months from the date of application
75% March 31, 2025 6 months from the date of application
90% June 30, 2025 9 months from the date of application
100% September 30, 2025 12 months from the date of application

What are the directions on storage of card data?

  • For face-to-face / proximity payment transactions done using cards, from August 1, 2025, no entity in the card transaction / payment chain, other than the card issuers and / or card networks, shall store the CoF data. Any such data stored previously shall be purged. 
  • For transaction tracking and / or reconciliation purposes, entities can store limited data – last four digits of card number and card issuer’s name – in compliance with the applicable standards. 

New draft directions on regulation of Payment Aggregators – Physical Point of Sale (PA-P)

The Payments Vision 2025 envisages direct regulation of PA-P and the new draft directions is a step in this direction.

What are the requirements for authorisation as PA-P?

  • Banks provide physical PA services as part of their normal banking relationship, and hence, do not require separate authorisation from RBI. 
  • Non-bank entities providing PA-P services as on the date of the directions, shall intimate to RBI within 60 days from the issuance of the directions about their intention to seek authorisation. They shall apply to RBI for authorisation by May 31, 2025. They shall be allowed to continue their operations till they receive communication from RBI regarding the fate of their application.
  • Non-bank PA-O – authorised as well as those whose application for authorisation is pending with RBI – shall seek the approval of RBI within 60 calendar days from the date of the directions, about their existing PA-P activity, if they would want to continue it.
  • In future, an authorised non-bank PA-O (or PA-P) which wants to commence physical (or online) PA activity, shall seek approval from RBI prior to commencement of such business.

What are the net-worth requirements for PA-P?

 

 At the time of application to RBI for authorisation By March 31, 2028 By the end of 3rd financial year of grant of authorisation
Non-banks already providing PA-P services ₹15 crore ₹25 crore -
New non-bank PA-P (i.e. entities which have not commenced operations) ₹15 crore - ₹25 crore

What if the entity does not obtain PA-P authorisation?

  • All existing non-bank PA-P which are not able to comply with the net-worth requirement or do not apply for authorisation within the stipulated time frame, shall wind-up PA-P activity by July 31, 2025.
  • Banks shall close accounts (used for PA activity) of non-bank PA-P (existing as on the date of the directions) by October 31, 2025 unless such PAs produce evidence regarding application for authorisation submitted to RBI.


References

Reserve Bank of India. (2020, March 17). 'Guidelines on Regulation of Payment Aggregators and Payment Gateways (Updated as on November 17, 2020)'. Retrieved from https://rbi.org.in/Scripts/NotificationUser.aspx?Id=11822&Mode=0

Reserve Bank of India. (2024, April 16). 'Regulation of Payment Aggregators – physical Point of Sale - DRAFT'. Retrieved from https://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=4418

Reserve Bank of India. (2024, April 16). 'Regulation of Payment Aggregators (PAs) - DRAFT'. Retrieved from https://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=4419

Reserve Bank of India. (2024, April 16). 'Regulation of Payment Aggregators (PAs) – Draft Directions'. Retrieved from https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=57713


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