Draft Guidelines for Offline Payment Aggregators (PA-Ps)

On April 16, 2024, the Reserve Bank of India (RBI) unveiled draft guidelines aimed at regulating payment aggregators (PAs) facilitating offline payments at physical point of sale (PA-P). These regulations are in addition to the existing framework governing online payment aggregators (PA-O). The RBI issued two draft directions: one introducing new regulations covering various aspects, including PA-P, and the other proposing amendments to existing regulations for PAs.

Key Highlights of the Proposed Guidelines are as follows:

  • Authorization: Non-bank PA-Ps must obtain authorization from the RBI to operate a payment system for offline payment aggregation by May 31, 2025. Existing non-bank PA-Os must seek approval from the RBI to continue their PA-P activities.
  • Compliance Requirements: PA-Ps must adhere to governance, merchant onboarding, customer grievance redressal, and dispute management frameworks, as well as security, fraud prevention, and risk management measures outlined in the PA Guidelines. Continued compliance with these conditions is essential for authorization and approval by the RBI.
  • Net-worth Criteria: Non-bank PA-Ps must maintain a minimum net-worth of INR 15 crore at the time of application and INR 25 crore by March 31, 2028.
  • Escrow Account: Funds for delivery versus payment transactions must be routed through the escrow account, which can be used for both PA-O and PA-P activities.
  • Payments on merchant’s instructions: The existing debit permitted from escrow account in respect of payment to any other account on specific directions from merchant, is proposed to be deleted from the PA Guidelines.
  • KYC for Merchants: Merchants are categorized based on turnover and GST registration status, with corresponding due diligence requirements for KYC conducted by PA-Ps. The proposed categories are as follows:
  • Small Merchants: These merchants operate with physical presence, exclusively conducting face-to-face and proximity transactions, and generate an annual turnover of less than INR 5,00,000. They are not registered under the Goods and Services Tax (GST) regime. For small merchants, PAs are required to perform due diligence, including contact point verification (CPV) of their physical premises and verification of their bank account details.
  • Medium Merchants: These merchants have either physical or online presence and generate an annual turnover ranging from more than INR 5,00,000 to less than INR 40,00,000. Similar to small merchants, they are not registered under the GST regime. PAs must conduct CPV as well as obtain and verify one officially valid document (OVD) of the proprietor/beneficial owner and one OVD of the business.
  • Monitoring of Merchants: PA-Ps must monitor transaction activities of all merchants and ensure compliance with their business profiles, escalating customer due diligence for high-risk transactions. These responsibilities are presumably recommended by the RBI to mitigate the risk of merchants engaged in money laundering activities.
  • Registration with FIU: Non-bank PAs must register with the Financial Intelligence Unit-India (FIU-IND) and provide requested information.
  • Restrictions on Data Storage: Like online transactions, restrictions on storage of card data apply to offline transactions, effective from August 01, 2025.
  • Agent Appointment: PAs can appoint third-party agents for merchant onboarding, with PAs assuming responsibility for their actions.


The RBI has invited comments and feedback on the draft directions until May 31, 2024.

The issuance of these preliminary guidelines highlights the RBI’s proactive stance in nurturing a secure and efficient payment landscape. By actively seeking input from the public, the central bank aims to gather diverse viewpoints and enhance the regulatory framework to better cater to industry requirements.

The RBI’s draft directive represents a significant stride in overseeing Payment Aggregators (PAs), extending oversight to offline transactions that were previously unregulated. By aligning the entry criteria for both physical and online PAs, it promotes fairness in the industry. Notably, the updated definition of PAs now encompasses both online and physical Point of Sale operations, ensuring comprehensive regulation. The proposal to permit shared escrow accounts for PA activities demonstrates flexibility, although further clarity is necessary regarding the implications of closing such accounts.

Overall, the draft directive presents a holistic framework for regulating PAs, addressing regulatory gaps in offline transactions while bolstering transparency and security in the payment’s ecosystem. As the payment landscape evolves, collaborative efforts among regulators, industry stakeholders, and consumers will be crucial in shaping a resilient and inclusive financial infrastructure.