Introduction

The digital payment landscape in India is changing with a rising number of transactions online and over point-of-sale terminals. RBI has recently called for new regulations to cover payment aggregators which are companies that have played a key role in making these transactions possible.

As the central bank looks to bolster and extend supervision over the payment ecosystem, it has released draft guidelines laying down a comprehensive framework for accountability in physical point-of-sale payment aggregation. The draft regulations cover deemed net worth for our non-bank entities engaged in providing these services as well as the need to tighten procedures on merchant information management and know your customer (KYC) processes.

The rational stance taken by the RBI demonstrates why it is important for all those concerned with payments to avoid being caught in an isolated corner when the regulatory framework is being developed. By airing these draft guidelines for comment now, the RBI is acknowledging this need and seeking to obtain input from a range of different corners, charging that broad array of interested stakeholders with its attempts to address their views constructively.

The bank has sought public comments on draft that cover regulation of payment aggregators in physical point of sale, and amendment(s) to certain existing regulations, as per a statement released by the institution. RBI in its “Statement on Developmental and Regulatory Policies” released on September 30, 2022 had said that regulations need to be developed for face to face payments aggregators.

Also, given the growth of digital transactions and the considerable role that payment aggregators play in this field, the RBI indicated that updating current policies is a must. These updates include Know Your Customers (KYC) for clients such as corporate bodies or enterprises, inspection of merchant’s information, handling operations in Escrow accounts, and more, which aims at strengthening the payment ecosystem.

Feedback and comments are invited on the draft directions by May 31, 2024, RBI revealed.

Networth Prerequisites

The minimum net worth to be held by non-banks offering payment aggregating services in physical points of sale (PA-Ps), is fixed at Rs.15 crore at the time of submission. Furthermore, the net worth of Rs.25 crore needs be maintained by March 31, 2028, according to draft rules.

On the other hand, newly established payment aggregators which are non-banking entities (PA-Ps) must possess a minimum net worth of Rs. 15 crore at the time of submission to RBI for authorization, and by March 31, 2028, they need to attain a minimum networth of Rs. 25 crore.

Also, as part of their application, non-bank PA-Ps have to come up with a certificate from their statutory auditor as well as the most recent audited statement of financial accounts to demonstrate compliance with applicable net worth requirement.

Further, non-bank PA-Ps that are newly incorporated and are not able to submit audited statement of financial accounts may only show current networth on a certificate from their statutory auditor along with provisional balance sheet, the central bank added.

As per the RBI's draft rules, all existing non-bank PA-P that are not able to meet the networth requirement and do not apply for authorisation within stipulated time frame shall be forced to wind up their PA-P activities by July 31, 2025.

"Banks must close accounts of non-bank PA-P that were already in existence as of the date this circular was published, by October 31, 2025, unless they can produce evidence that they submitted an application for authorisation to the RBI," the RBI added.

Conclusion

This initiative illustrates the RBI's commitment to encourage sound development of its financial system and protect consumer interest in an environment free from fraud. Its proposal for regulation on point-of-sale physical payment providers has laid down a benchmark in the history of India’s digital payment sphere. By introducing draft guidelines addressing specific protection requirements from net worth to customer information handling for those merchants who participate in payment aggregation, the RBI has moved responsibly forward to ensure system safety and stability.

The requirements proposed by the regulations aim to safeguard the interests of consumers and put a lid on risks present. They also look to create fair conditions for all involved in payment aggregation which would suggest that non-bank entities have some specific net worth threshold if allowed. This measure ensures these entities offer long-term sustainability in order to live up to their obligations.