The Reserve Bank of India (RBI) has initiated steps to strengthen the regulatory framework for offline payment aggregators (PAs), entities that facilitate payments from customers to merchants in physical stores and face-to-face transactions. The move comes following concerns raised over the potential for irregularities and opacity in the offline PA space.
Proposed Guidelines
The RBI has issued two consultation papers outlining proposed guidelines for offline PAs. These guidelines aim to bring the regulation of offline PAs in line with existing norms for online PAs and enhance the overall safety and security of the payment ecosystem.
Key Provisions
Key provisions of the proposed guidelines include:
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Mandatory Registration:
Non-bank PAs providing offline services will be required to register with the RBI within 60 days of the issuance of the guidelines.–
Enhanced KYC Requirements:
PAs will be required to conduct more stringent KYC checks on merchants they onboard, including physical verification and verification of bank accounts.–
Restrictions on Card Data Storage:
To prevent data breaches and unauthorized access, PAs will be prohibited from storing card data beyond the last four digits of the card number and the issuer’s name, effective from August 1, 2025.–
Sustainability Measures:
PAs will be required to maintain a minimum net worth of INR 15 crore (extendable to INR 25 crore by 2028) and implement risk-based payment measures to ensure the sustainability of their operations.Compliance Timeframe
Existing offline PAs that fail to comply with the new guidelines by July 31, 2025, will be required to wind up their operations. Banks providing PA services will have three months to comply with the revised instructions.
Implications
The proposed guidelines are expected to have a significant impact on the offline PA industry. They aim to strengthen the regulatory oversight of PAs, prevent irregularities, and enhance the security of payment transactions. The guidelines are open for public comment until May 31, 2023, and the RBI is expected to finalize the regulations based on the feedback received.
