Payments Regulation · RBI Master Direction
RBI's New Payment Aggregator Framework: A Strategic Reshuffle for Payments.
What the September 2025 Master Direction means for aggregators, banks, fintechs, and merchants.
Few sectors have grown as fast and as visibly as digital payments in India. UPI volumes, merchant adoption, cross-border commerce — the numbers kept moving. What took longer to catch up was the regulatory framework governing the players at the centre of it all. The RBI's Master Direction on Payment Aggregators, released on 15 September 2025, is a serious attempt to change that.
It is worth spending time on this one. The direction brings together earlier circulars from 2020, 2021, and 2023 into a single document, formally brings offline payment aggregation under the licensing umbrella, creates a dedicated framework for cross-border flows, and refines how escrow and settlement work in practice. Across the industry, it changes things for aggregators, banks, and merchants in ways that will take a while to fully play out.
Here is what actually matters in the new direction — and what different players in the ecosystem need to think about.
One Framework, Three Models. Offline PAs Now Have a Clear Regulatory Home.
The 2020 guidelines were written largely with e-commerce in mind — they defined payment aggregators as intermediaries for online, card-not-present transactions. That left a large and fast-growing part of the industry (QR-based payments, POS networks, technology providers serving physical merchants at scale) without a clear regulatory framework to operate under.
The new direction fills that gap. Payment aggregation is now formally separated into three categories, with the governance, data-security, and dispute-resolution standards that already applied to online PAs now applying uniformly across the board.
Reaching Small Merchants Just Got Easier — But Accountability Stays With the PA.
One of the more thoughtful parts of the new direction is the simplified due-diligence path for smaller merchants. For businesses with annual turnover up to ₹40 lakh (or export turnover up to ₹5 lakh), PAs can now run a lighter onboarding process: PAN verification from the issuing authority, a contact-point verification of the business premises, and one Officially Valid Document from the proprietor or authorised signatory.
Digital KYC and agent-assisted Video-based Customer Identification Procedure are both permitted. For aggregators trying to reach merchants in smaller towns and semi-urban areas, this removes a real barrier — full KYC requirements have historically made the unit economics of serving small merchants difficult to justify.
The Escrow Structure Has Been Redesigned.
The new direction introduces separate escrow accounts for different types of activity — so the regulator gets a cleaner view of what is moving where, and domestic and cross-border funds don't get mixed in a single pool.
No pre-funding of Outward Collection Accounts. Funds for an overseas payment must be collected first, against a specific transaction, before they can be remitted — every outward remittance needs a traceable underlying transaction behind it. For cross-border aggregators, that reshapes how liquidity is managed.
Settlement timelines have also been made more flexible. The earlier T+1 and Td+1 structure is replaced with commercially negotiated terms between the PA and the merchant, as long as those terms are fair and transparent. Larger platforms now also have the option to settle funds directly to eligible third parties — such as logistics providers — on the merchant's direction, a useful provision for complex payout structures.
The Implications Are Different Depending on Where You Sit.
The direction does not affect everyone the same way. Here is a straightforward read of what each stakeholder group is dealing with.
| Stakeholder | Strategic implication |
|---|---|
| Banks | Their role as custodians of escrow, InCA and OCA accounts is formalised. Stronger monitoring systems are needed for cross-border flows — but greater structural influence in the PA value chain follows. |
| Fintech Aggregators | Higher compliance costs and capital requirements are real. Smaller players will need to decide: seek authorisation, move to a pure gateway model that doesn't hold funds, or partner with a licensed bank — depending on scale, margins, and direction. |
| Merchants | More documentation at onboarding in the short term. Over time: standardised settlement, formal grievance redressal, and greater consumer trust. Large platforms gain from the third-party settlement provision. |
| Consumers | The clearest net winner — a regulated, accountable PA ecosystem means more security, faster refunds, predictable dispute resolution, and reduced exposure to ghost merchants. |
The Direction Is Clear. What Varies Is How Prepared Each Player Is to Act on It.
Taken as a whole, the Master Direction is a considered piece of regulation. It doesn't try to slow the industry down — it tries to put the right structure around a segment that has grown very fast and, in some areas, outpaced the oversight that should have come with it. The approach to small-merchant onboarding shows the RBI is thinking about inclusion alongside risk, which matters for how the next phase of payments growth actually plays out.
For physical PAs, the 31 December 2025 authorisation deadline is the immediate pressure point. Meeting the net-worth requirement, putting governance frameworks in place, and building the agent-monitoring systems that simplified due diligence demands — none of that happens quickly. Teams that start now will be better placed than those that treat this as something to deal with later.
In the medium term, the institutions that get their compliance foundations right are the ones that will be able to move faster on the commercial opportunity. A more trusted, better-regulated merchant ecosystem is good for everyone operating in it — including the aggregators that helped build it.