The Reserve Bank of India (RBI) has issued its final Master Direction for the Regulation of Payment Aggregators. The rules are based on replacing previous regulations of 2020, 2021, and 2023 and are applicable to both banks and non-banking entities that sum up payments.
The new regulations, referred to as the Reserve Bank of India (Regulation of Payment Aggregators) Directions, 2025, become effective on September 15th, and consolidate several strands of older regulations into one overall strand. The instructions mark a turning point of the digital payments ecosystem of India, where billions of transactions are conducted monthly.
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Key Regulatory Changes
Three-Category Classification System: The RBI has introduced its first ever classification of payment aggregators into three categories, which are PA-O (Online) in cases of ecommerce and remote payments, PA-P (Physical) in cases of point-of-sale transactions involving both device and instrument and PA-CB (Cross-Border) in cases of inbound and outbound cross-border payments.
Stricter Capital Requirements: Capital requirement has been increased with a minimum net worth of 15 Cr at the time of application and 25 Cr after the third year of authorization. The entities that are not banks are obliged to receive new authorization by 31 December 2025 or be potentially closed by 28 February 2026.
Enhanced Governance and Compliance: The new regulations demand better due diligence of merchants, compulsory KYC check and PAN verification of small merchants and full KYC of large merchants, constant supervision of merchant transactions, and appointment of special officers who will be able to address grievances of merchants.
Cross-Border Payment Controls: Key rules for cross-border PAs include no co-mingling of funds between inward and outward transactions, a limit of ₹25 lakhs per transaction for both directions, and prohibition from buying or selling foreign currencies.
Strengthened Escrow Account Management: All funds must be held in escrow accounts with scheduled commercial banks, with strict separation from PA corporate accounts and T+1 settlement timelines.
Industry Impact
Following the publication of draft rules in April 2024, months of industry consultation resulted in the directions. Payment aggregators are entering a new era of regulation that prioritises capital adequacy, transparency, and strong governance.
Industry Experts
Parimal Kumar Shivendu, Group Head, Easebuzz | ex-AGM, RBI: "The RBI's new Master Direction on Payment Aggregators is a watershed in regulatory approach. It reduces regulatory clutter by moving to a single PA license with intimation-based business expansion, eases compliance by shifting to a principle-based framework instead of micro-rules, and builds accountability by making PAs directly responsible for merchant due diligence rather than acquiring banks. This is a landmark step that balances ease of doing business with strong oversight, and will empower innovation while safeguarding the integrity of the payments ecosystem."
Savita Vashisht, Co-Founder & Executive Director, NPST: "The Reserve Bank of India's (RBI) Master Direction for Payment Aggregators is a significant advancement for the country's digital payments landscape. By creating a clear, unified, and stronger regulatory framework, the directive brings much-needed clarity and confidence to the industry. This strategic move not only enhances protections against fraud and improves dispute resolution and merchant governance but also paves the way for greater innovation, inclusion, and sustained growth. For Payment Aggregators, the directive presents a prime opportunity to build more secure, seamless, and future-proof payment solutions. The true test now lies in the execution. The focus must now shift to integrating real-time risk intelligence, strengthening merchant due diligence, and establishing scalable online dispute resolution systems. The future of India's digital payments ecosystem will ultimately be defined by the resilience of these systems, not just by the sheer volume of transactions they process."
The new framework demonstrates the RBI's commitment to balancing innovation with strong regulatory oversight as India's digital payments infrastructure expands rapidly.
