RBI Proposes Strengthening Regulations on Payment Aggregators

• 18 Apr 2024

On 16th April 2024, the Reserve Bank of India (RBI) has released draft guidelines to enhance regulations on payment aggregators, covering aspects like KYC, due diligence, and operations in Escrow accounts, aiming to bolster the payment ecosystem.

Key Points

• Scope of Regulations: The draft guidelines encompass various aspects such as KYC and due diligence of merchants, operations in Escrow accounts, and measures to strengthen the overall payment ecosystem, reflecting the growing importance of digital transactions.
• Inclusion of Physical Point-of-Sale Activities: The guidelines extend to cover the physical point-of-sale activities of payment aggregators, recognizing their role in facilitating face-to-face/proximity payment transactions.
• KYC and Due Diligence Requirements: PAs are required to conduct due diligence of merchants based on the Customer Due Diligence (CDD) norms outlined in the Master Directions on Know Your Customer (MD-KYC), 2016, to ensure compliance and mitigate risks.
• Restrictions on Card Data Storage: Entities involved in face-to-face/proximity payment transactions using cards are prohibited from storing Card-on-File (CoF) data, effective from August 1, 2025, with a mandate to purge any previously stored data.
• Financial Requirements: Non-bank entities offering PA-P (payment aggregation and processing) services must maintain a minimum net worth of Rs 15 crore at the time of application for RBI authorization, increasing to Rs 25 crore by March 31, 2028, and thereafter.
• Comment Period and Implementation: The RBI has invited comments on the draft guidelines until May 31, 2024, signaling a consultative approach before finalizing the regulations, which are aimed at fostering a robust and secure payment ecosystem in India.