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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 sitting at the centre of it all. The RBI's Master Direction on Payment Aggregators, released on September 15, 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: physical, online, and cross-border. Physical PAs, which were previously operating as technology service providers, need to apply for RBI authorization by December 31, 2025, with a minimum net worth of Rs 15 crore at application, rising to Rs 25 crore by the end of the third authorized financial year. The governance, data security, and dispute resolution standards that already applied to online PAs will now apply uniformly across the board.
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Reaching Small Merchants Just Got Easier. But the 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 an annual turnover not exceeding Rs 40 lakh, or export turnover not exceeding Rs 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 authorized 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 lighter onboarding path opens up a segment that was genuinely hard to serve profitably before. The catch is that the PA remains fully responsible for due diligence quality, even when the work is done through agents. That responsibility needs to be built into how agent networks are trained and monitored."
The Escrow Structure Has Been Redesigned
The new direction introduces separate escrow accounts for different types of activity: a domestic escrow account for local settlements, an Inward Collection Account for receiving foreign funds, and an Outward Collection Account for making overseas payments. Keeping these flows separate gives the regulator a cleaner view of what is moving where, and reduces the risk of domestic and cross-border funds getting mixed up in a single pool.
The more operationally significant change is the prohibition on pre-funding Outward Collection Accounts. Funds for an overseas payment now need to be collected first, against a specific transaction, before they can be remitted. For aggregators handling cross-border payments, this has real implications for how liquidity is managed. Every outward remittance needs a traceable underlying transaction behind it.
Settlement timelines have also been made more flexible. The earlier T+1 and Td+1 structure has been replaced with commercially negotiated terms between the PA and the merchant, as long as those terms are fair and transparent. Larger platforms also now 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.
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 does not 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 that 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 December 31, 2025 deadline for authorization 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.
And 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.
Navigating the New Payment Aggregator Framework?
The Digital Fifth works with banks, NBFCs, fintechs, and payment players on regulatory strategy, compliance architecture, and digital transformation. If the new PA framework raises questions about your licensing position, escrow structure, or merchant onboarding model, we can help you think it through.
