Payment aggregators seek RBI's extension on merchant re-KYC deadline
What's the story
Payment aggregators have requested the Reserve Bank of India (RBI) to extend the September 15 deadline for merchant re-KYC. The appeal comes as these companies struggle with a backlog of thousands of merchants across both online and offline sectors. If not addressed, this could disrupt digital payments in India.
Deadline concerns
Offline merchants at risk of missing deadline
A significant number of small informal offline merchants using QR codes for UPI payments could miss the regulatory deadline.
Moneycontrol earlier reported that 30-35% of these merchants might not be able to meet the re-KYC requirement.
Additionally, a million small online business entities are also at risk of missing this crucial verification window.
KYC hurdles
Potential leniency from regulator possible
Offline merchant acquiring firms like Paytm, PhonePe, and Google Pay are facing major challenges due to the stricter KYC standards and physical verification requirements.
Many of their small informal merchants lack proper documentation, making it difficult for these companies to comply with the new rules.
There is a possibility that the regulator may take a lenient view considering the importance of this segment in achieving larger financial inclusion goals.
Regulatory update
Backlog issue traces back to updated RBI guidelines
The KYC backlog issue stems from the RBI's updated Master Directions, released in September 2025.
These guidelines officially classify payment aggregators into three categories: PA-Online, PA-Physical, and PA-Cross Border.
While all parties had ample time to comply with these regulations since their introduction late last year, the tendency to delay could lead to potential payment disruptions.
Merchant outreach
Payment aggregators anticipate completing around 80% of re-KYC by deadline
Payment aggregators are not only struggling to reach millions of merchants across India but also to ensure they understand the RBI's KYC and merchant due diligence framework.
Most of these merchants do not contribute much to the total payments volume or value.
However, it is expected that most payment aggregators will complete around 80% of re-KYC by the deadline despite capacity constraints due to RBI rules mandating in-person KYC by their employees rather than third-party agencies.