RBI's New Master Directions For Payment Aggregators: What It Means For India’s Digital Payments

India’s digital payments industry, which has been expanding at breakneck speed, is entering a new chapter. On September 15, the Reserve Bank of India (RBI) issued a fresh set of master directions aimed at bringing greater clarity, accountability, and governance to payment aggregators (PAs) — the very backbone of online and offline transactions in the country.

Called the Reserve Bank of India (Regulation of Payment Aggregators) Directions, 2025, the new rules are now in effect and bring together multiple strands of earlier guidelines into one comprehensive framework. For startups, fintechs, and established players alike, these rules will reshape how payment aggregation is carried out across ecommerce, physical outlets, and even cross-border transactions.

The Big Shift: Clear Categorisation Of Aggregators

For the first time, the RBI has formally split payment aggregators into three categories, recognising the varied nature of digital transactions in India:

• PA-O (Online): Aggregators enabling ecommerce and other remote payments where the customer and merchant aren’t in proximity.

• PA-P (Physical): Aggregators handling payments at physical points-of-sale, where both the device and instrument are present.

• PA-CB (Cross-Border): Aggregators facilitating inward and outward cross-border payments, with sub-categories based on the direction of transactions.

This categorisation signals that RBI is moving towards a more nuanced, activity-based regulation rather than treating all payment aggregators alike.

Fresh Compliance Deadlines For Non-Bank Players

Banks, which already operate under RBI’s purview, can continue their PA businesses without additional approvals. But non-bank players — which includes most startups and fintechs — will need to secure fresh authorisation by December 31, 2025.

Failing to comply could mean shutting down operations by February 28, 2026, a deadline that puts immense pressure on smaller players who may not have deep pockets.

The entry barrier has also been raised in terms of capital requirements:

• Minimum net worth of ₹15 Cr at the time of application.

• ₹25 Cr net worth by the end of three years from authorisation.

• Ongoing maintenance of this threshold to continue operating.

In addition, PAs receiving foreign direct investment will need to comply with FEMA guidelines and submit auditor certificates to prove their financial health.

Governance Gets Stricter

One of the RBI’s sharpest focus areas is governance. The new rules mandate:

• Enhanced due diligence on merchants to weed out fraudulent entities and prevent prohibited product sales.

• Mandatory KYC checks — PAN verification for smaller merchants and full KYC for larger ones.

• Continuous monitoring of merchant transactions to spot suspicious activities.

• Appointment of a dedicated officer for merchant grievance redressal.

• Building risk management systems to prevent fraud and ensure customer safety.

Non-bank PAs will also need to register with the Financial Intelligence Unit-India (FIU-IND) and comply with its reporting requirements, underlining the regulator’s push for tighter oversight.

Cross-Border Payments Under The Lens

With global ecommerce and freelancing creating a growing volume of inward and outward flows, RBI has carved out a dedicated framework for cross-border PAs (PA-CBs).

Key rules include:

• No co-mingling of funds — inward and outward transactions must be kept separate.

• Cap of ₹25 Lakhs per transaction for both inward and outward payments.

• PA-CBs barred from buying or selling foreign currency — that remains the domain of authorised dealers.

• Only authorised payment methods can be used for outward payments, with small prepaid instruments excluded.

This move shows RBI’s intent to balance innovation in cross-border commerce with strict controls to prevent misuse.

Escrow Accounts: Safeguarding Customer Funds

Another crucial part of the directions deals with escrow account management, designed to protect customer money.

• All funds must be parked in an escrow account with a scheduled commercial bank.

• Strict segregation of customer funds from the PA’s corporate accounts.

• Settlement timelines defined as T+1 (one day after the transaction).

• Only the “core portion” of domestic escrow balances can earn interest — cross-border funds cannot.

• Escrow accounts cannot be used for cash-on-delivery transactions, a practice often used by ecommerce players.

Further, merchant agreements must now clearly disclose all fees — including MDR, set-up charges, and maintenance costs — to ensure transparency.

Why These Directions Matter

The new master directions are not coming out of the blue. Back in April 2024, the RBI had floated draft rules, seeking feedback on expanding regulation to cover offline aggregators and strengthening KYC and escrow norms. The final version, released now, reflects months of industry consultations with startups, associations, and law firms.

For India’s startup ecosystem, especially fintechs, these rules will act as both a challenge and an opportunity. While higher compliance and net worth thresholds may squeeze out smaller players, the structured framework can help build trust, attract more investors, and strengthen India’s already vibrant digital payments landscape.

India processes billions of digital transactions every month, and payment aggregators sit at the heart of this ecosystem. By tightening norms, RBI is clearly betting on long-term stability over short-term ease.

The coming months will reveal how startups and non-bank players adapt — whether by raising fresh funds to meet net worth requirements, partnering with banks for compliance, or exiting the market altogether.

Either way, one thing is clear: the future of India’s digital payments will be shaped not just by innovation, but also by strong regulatory guardrails.