Introduction
As digital payments have seen a steep rise in India, the Reserve Bank of India ("RBI") has progressively refined its regulatory framework for payment intermediaries. With the issuance of the Master Direction on Regulation of Payment Aggregators, 2025 1 ("Master Directions"), the RBI has consolidated and harmonised the erstwhile regulatory regime applicable to domestic payment aggregators ("PAs") and crossborder PAs ("PA-CBs") under the Guidelines on Payment Aggregators and Payment Gateways of 2020 2 ("PAPG Guidelines, 2020") read with clarification issued thereto in 2021 3 ("Clarification to PAPG Guidelines, 2021") (collectively, the "PAPG Guidelines"), and the Regulation of Payment Aggregator – Cross Border (PA - Cross Border), 2023 ("PA-CB Regulations"). 4
At the outset, the Master Directions bring in a series of changes including regulation of PAs assisting and facilitating offline electronic payments, a new comprehensive framework for KYC verification and merchant due diligence processes, a revised approach to settlement timelines, clarity on escrow account operations, and other compliance related requirements.
Regulatory Background
Initially governed by the Directions for opening and operation of accounts and settlement of payments for electronic payment transactions involving intermediaries, 2009,5 the payment intermediary sector did not envisage any authorisation requirement and purely set out the framework within which such intermediaries were to operate. The legal landscape experienced a major shift with the issuance of the PAPG Guidelines. This brought non-bank PAs under an authorisation regime for the first time, regulated in entirety the activities of PAs primarily covering online transactions, and also set out a more stringent framework for merchant onboarding, settlement cycles, and baseline technology requirements. All along, the RBI had kept delivery versus payment transactions6 ("DvP Transactions") outside the regulatory purview, considering such transactions involve significantly lower risk since the payment and delivery of goods occur simultaneously. However, in response to the growing integration of digital methods in offline transactions (such as UPI or QR based payments), the RBI recognised the need for regulatory oversight even for DvP Transactions. Through its Statement on Developmental and Regulatory Policies dated September 30, 2022,7 the RBI, for the first time, indicated its intention to also regulate offline PAs to ensure parity between online and offline payment ecosystems. This was followed by an RBI press release containing draft regulations for physical point-of-sale PAs and amendments to the PAPG Guidelines ("Draft Guidelines"),8 which has now culminated in the issuance of the Master Directions
Applicability and Implementation Timelines
The Master Directions apply to all bank and non-bank PAs, which includes online PAs ("PA-O"), physical PAs ("PA-P"), and cross-border PAs ("PA-CB") (detailed below). Notably, unlike the erstwhile PAPG Guidelines, the current framework explicitly brings Authorised Dealer ("AD") banks and scheduled commercial banks ("SCBs") within its scope to the extent such banks engage with PAs and lays down specific obligations applicable to these entities.9
In terms of implementation, the Master Directions are effective immediately from their date of publication (September 15, 2025).10 However, recognising the need for a phased transition, certain compliance requirements have been granted a lead time. For instance, the revised due diligence mechanism for merchant onboarding will become applicable to new merchants from January 1, 2026. For existing merchants onboarded on or before December 31, 2025, PAs have been provided with a period of 1 (one) year from the date of publication of the Master Directions to ensure full compliance.11 Further, PAs have also been given time till the end of the year to comply with the revised instructions in relation to operation of, and settlements from, escrow accounts.12
Analysis: Key Takeaways
The Master Directions consolidate and bring in a slew of changes to the previously existing regime. Notable revisions and their implications are detailed below.
Categorisation of PAs and inclusion of DvP Transactions
The Master Directions revise the regulatory approach to PAs. First, it characterises a PA as an entity that facilitates aggregation of payments made by customers to merchants for the purchase of goods, services or investment products.13 It then consolidates and classifies PAs into 3 (three) categories, i.e., PA-Ps, PA-Os, and PA-CBs. A PA-P has been defined as a PA that facilitates transactions where both the acceptance device and payment instrument are physically present in close proximity while making the transaction;14 and a PA-O has been defined as one that facilitates transactions where the acceptance device and payment instrument are not present in close proximity while making the transaction.15 The erstwhile PAPG Guidelines did not carry this distinction between PA-Ps and PA-Os, since the intent was to primarily regulate PAs aggregating online electronic or digital transactions.
Separately, a PA-CB has been defined as a PA that facilitates aggregation of cross-border payments for current account transactions that are not prohibited under the Foreign Exchange Management Act, 199916 for its onboarded merchants through e-commerce mode.17 Earlier, the PA-CB Regulations identified 3 (three) types of PA-CBs, i.e., export-only PA-CB (PACB-E), import-only PA-CB (PA-CB-I), and export and import PA-CB (PA-CB-E&I).18 The Master Directions simplify this classification into 2 (two) sub-categories, namely PA-CBs facilitating inward transaction and PA-CBs facilitating outward transaction.19 Regardless of this distinction, the Master Directions do not appear to restrict a PA-CB from engaging in both inward and outward cross-border transactions – for instance, the prohibition on co-mingling of funds and the netting off of inward and outward transactions20 applies equally to PA-CBs handling both types of transactions.
While the Draft Guidelines had drawn a distinction between the treatment of online and offline DvP Transactions by excluding online DvP Transactions from the regulatory scope, this gap has now been addressed in the Master Directions.21 This change clearly reflects RBI's intent to regulate all DvP Transactions wherever electronic or digital payment methods are used. Notably, cash-on-delivery ("COD") transactions have been restricted to their literal meaning, in contrast with current practices where COD may involve electronic payments. Consistent with the RBI's practices so far, these remain outside the scope of the Master Directions, likely as they do not involve a third-party intermediary for fund pooling and settlement between the customer and merchant, thereby eliminating settlement risk for both parties.
Authorisation requirements
In line with the intent of the PA regulatory framework, authorisation under the Master Directions is only required by non-bank PAs.22 The Master Directions have retained from the erstwhile regulations the fundamental requirements of authorisation and capital adequacy, such as compliance with prescribed norms related to form filing, obtaining no objection certification from other financial sector regulators (as applicable), and meeting net worth criteria in a two-step manner23 with certain clarifications, such as vis-à-vis the computation of net worth, for which the value of deferred tax assets are now to be deducted from the calculated net worth.24 In terms of procedural requirements, the Master Directions have now formally codified the submission of application forms through the RBI's online Pravaah portal25 ("Pravaah Portal"), a practice in effect from May 01, 2025 pursuant to the RBI notification on Processing of Regulatory Authorisations / Licenses / Approvals through PRAVAAH26 that was issued in April this year to streamline RBI's application processing.
The authorisation requirements under the Master Directions for new PAs (including new PA-Ps) as well as existing PAs carrying out PA-P business or looking to venture into PA-P business have been briefly set out below:27
(i) New PA business (any category): An entity wanting to venture into any of the 3 (three) categories of payment aggregation business (including PA-P business) will be required to secure prior authorisation from the RBI as per the Master Directions and will be required to make necessary filings through the Pravaah Portal.
(ii) Entities carrying out PA-P business solely: Entities carrying out solely PA-P business are required to apply for authorisation through the Pravaah Portal by December 31, 2025. In case the entities fail to do so, such entities have been mandated to wind down the PA-P business by February 28, 2026.28
(iii) Authorised PA for any one category, commencing business in other category(ies): Consistent with the approach under the earlier regulations, particularly the PA-CB Guidelines, the Master Directions reflect the RBI's intent to move towards an easier and presumably single authorisation framework for PAs carrying out different payment aggregation activities. In this regard, the Master Directions have clarified that: (a) PAs having a certificate of authorisation ("CoA") and carrying out PA-P activities are only required to intimate RBI of such ongoing PA-P activities.29 Interestingly, no timeframe for intimation of such existing business activities has been provided. However, given the immediate applicability of the Master Directions, this can reasonably mean that such PAs should intimate RBI as soon as possible for obtaining a revised CoA; (b) PAs having a CoA and intending to commence business in another PA category, are required to intimate RBI at least 30 (thirty) days prior to commencing such new business activity.30 This intimation based framework is a deviation from the approval-based regime under the PA-CB Regulations where any authorised PA which sought to commence PA-CB activity (and vice versa) was required to seek approval (not an authorisation) from the Department of Payment and Settlement Systems (DPSS), RBI prior to commencement of such business,31 and is reflective of RBI's intent of establishing a single authorisation regime for PAs.
(iv) PAs awaiting issuance of CoA: The intimation requirement to the RBI in re existing PA-P business also extends to PAs whose application for grant of CoA (for PA-O or PA-CB) is under consideration. Where such entities have an existing PA-P business, such entities must provide this information to the RBI via the Pravaah Portal latest by December 31, 2025.32 It is interesting to note that the RBI has also done away with the pre-requisite mandate for all existing non-bank PA-CBs to register themselves with the FIU-IND before seeking authorisation from the RBI.33 While FIU-IND registration has been retained under the Master Directions as a mandatory requirement for non-bank PAs,34 it appears that entities including PA-Ps may now apply for FIU-IND registration and PA authorisation in parallel instead of sequentially.
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Footnotes
1. Available here.
2. Available here.
3. Available here.
4. The Master Directions repeal the PAPG Guidelines and PA-CB Regulations in entirety. Except in respect of an existing PA-CB that had applied for PA-CB authorisation on or before April 30, 2024 and a decision thereon is pending with RBI, they also repeal guidelines on: (i) Processing and Settlement of Export related receipts facilitated by Online Payment Gateways, November 16, 2010; (ii) Processing and Settlement of Export related receipts facilitated by Online Payment Gateways – Enhancement of the value of transaction, June 11, 2013; and (iii) Processing and settlement of import and export related payments facilitated by Online Payment Gateway Service Providers, September 24, 2015. The RBI Directions for opening and operation of Accounts and settlement of payments for electronic payment transactions involving intermediaries, November 24, 2009, are also repealed, except in relation to an existing PA-O which has sought authorisation and a decision thereon is pending with the RBI.
5. Available here.
6. A transaction where delivery of goods or services occurs immediately or simultaneously with the completion of payment.
7. Available here.
8. Available here. Our analysis of the Draft Guidelines can be viewed here.
9. Paragraph 3, Master Directions.
10. Paragraph 2, Master Directions.
11. Paragraph 13(j), Master Directions.
12. Paragraph 16(a), Master Directions.
13. Paragraph 4(i), Master Directions.
14. Paragraph 4(i)(i), Master Directions.
15. Paragraph 4(i)(iii), Master Directions.
16. Available here.
17. Paragraph 4(i)(ii), Master Directions.
18. Paragraph 2.2, PA-CB Regulations.
19. Paragraph 4(i)(ii), Master Directions.
20. Paragraph 11(a), Master Directions.
21. Paragraph 1.1, Draft Guidelines.
22. Paragraph 5(a), Master Directions.
23. An entity seeking authorisation to commence or carry on PA business is required to (i) have a minimum net worth of INR 15 crore (Indian Rupees fifteen crore) at the time of tendering an application for authorisation, and (ii) attain a minimum net worth of INR 25 crore (Indian Rupees twenty five crore) by the end of the third financial year of grant of authorisation.
24. Paragraph 6(c), Master Directions.
25. Available here.
26. Available here.
27. Paragraph 5(d), Master Directions.
28. Paragraph 5(d)(iii), Master Directions.
29. Paragraph 5(d)(i)(a), Master Directions.
30. Paragraph 5(d)(i)(b), Master Directions.
31. Paragraph 3.5, PAPG Guidelines.
32. Paragraph 5(d)(ii), Master Directions.
33. Paragraph 2.7, PA-CB Regulations.
34. Paragraph 13(i), Master Directions.
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