Fees, Price Drivers and 2026 Rules
RBI rules for payment aggregators (2025 Master Direction): what merchants should know
What the RBI Master Direction on Regulation of Payment Aggregators of September 2025 means for merchants: PA-O, PA-P and PA-CB, escrow, KYC, settlement terms, refunds and card data.
If you accept payments through a gateway, a soundbox provider, a POS provider or any company that is not your own bank, the money usually passes through a payment aggregator (PA). The RBI's Master Direction on Regulation of Payment Aggregator (PA), dated 15 September 2025 (RBI/DPSS/2025-26/141), consolidates the earlier 2020–2023 guidelines and covers three kinds of aggregator: PA-Online (PA-O), PA-Physical (PA-P) for in-person payments, and PA-Cross Border (PA-CB). For merchants, the important parts are: non-bank PAs must hold your funds in an escrow account with a scheduled commercial bank; settlement timelines must be stated fairly and transparently in your agreement; PAs must carry out merchant due diligence (with a simpler route for small merchants); refunds normally go back to the original payment method; and card credentials may not be stored in systems the merchant accesses. This guide explains what to look for. It belongs to the fees overview.
Who is a payment aggregator
A PA brings many merchants together, collects customer payments for them and settles to them. Banks can act as PAs; non-bank PAs need RBI authorisation.
| Category | When it applies | Examples of what you might use |
|---|---|---|
| PA-O | The payment instrument and the acceptance device are not close to each other | Online payment gateway, payment links, in-app checkout |
| PA-P | The payment instrument and acceptance device are physically close | Card terminals and soundbox set-ups from non-bank providers |
| PA-CB | Cross-border payments for permitted current-account transactions | Exporters collecting from abroad, importers paying overseas |
A payment gateway in the narrow sense is the technology; the PA is the entity handling funds. Many companies do both.
What the Master Direction means for you
| Topic | What the direction says (summary) | What to check |
|---|---|---|
| Authorisation | Non-bank PAs need RBI authorisation; transition timelines applied to existing PAs, with PA-P entities required to apply by 31 Dec 2025 | Is your provider on the RBI's list of authorised PAs, or covered by a pending application? |
| Net worth | ₹15 crore at application, ₹25 crore by end of the third financial year after authorisation | A sign of the provider's capacity, not a guarantee |
| Escrow | Funds collected for merchants kept in a separate escrow account with a scheduled commercial bank; day-end balance not below unsettled merchant dues | Ask which bank holds the escrow |
| Settlement | As per the PA-merchant agreement, which must be fair, equitable and transparently mention settlement timelines | Settlement days written in your contract |
| Merchant due diligence | Standard KYC, with an alternative route for small merchants (annual turnover up to ₹40 lakh, or export turnover up to ₹5 lakh) where CKYCR is not available: PAN or Form 60, contact point verification and a certified officially valid document | Prepare documents; expect re-verification for existing merchants |
| Charges | PAs must follow MDR instructions; charges beyond the price must be distinctly displayed to the payer before the transaction | How fees and any customer charge appear at checkout |
| Refunds | Refunds go to the original payment method unless the payer instructs otherwise; routed through escrow unless the merchant manages it directly and the payer is informed | Refund process and fees |
| Disputes | PAs must have a dispute resolution mechanism with timelines for refunds, chargebacks and merchant disputes | Ask for the written process |
| Card data | Customer card credentials shall not be stored within the database or server accessed by the merchant | Use tokenised or hosted checkout |
The direction took effect on issue, with specific dates for some provisions. Merchants onboarded until 31 December 2025 were to meet the due-diligence requirements within one year of the direction, and from 1 January 2026 new merchants are onboarded under it.
Settlement: T+1 is common, but it is a contract term
The 2020 guidelines required settlement to the merchant within one day of the relevant date (Ts+1, Td+1 for delivery, or Tr+1 after the refund period); the 2025 Master Direction leaves the timeline to the agreement, provided it is transparent. In the market, T+1 working day settlement is common for cards and UPI, with same-day or instant settlement sold as an extra. Some merchants with delivery-based businesses (for example, pre-orders) may see settlement linked to delivery. See the settlement guide for the cost of waiting.
Worked example: reading an agreement (illustrative)
| Clause in an offer | What it means | Question to ask |
|---|---|---|
| "Settlement T+2 working days; T+1 at 0.10% extra" | Waiting one extra day saves 0.10% | Is T+1 worth ₹100 per ₹1 lakh to you? |
| "Rolling reserve 5% for 90 days for new merchants" | 5% of sales held back for 90 days | When does it end; is it reviewed? |
| "PA may hold settlement in case of suspicious activity" | Standard risk clause | What triggers it; how will you be told? |
| "Refunds debited from next settlement" | Normal practice | Refund fee? MDR returned? |
A rolling reserve of 5% on ₹10 lakh of monthly sales ties up ₹50,000 a month, ₹1,50,000 at its peak after 90 days. That is real working capital.
Choosing between a bank and a PA
| Point | Bank as acquirer | Non-bank PA |
|---|---|---|
| Onboarding | Usually needs a current account with the bank | Often faster and digital |
| Products | Terminals, QR, sometimes gateways | Gateways, links, soundboxes, plugins, subscriptions |
| Settlement | Into your account with that bank or others | Into any account you nominate |
| Pricing | Standard tiers | Standard plans plus custom pricing |
| Regulation | Banking regulation plus payment rules | Master Direction on PAs |
Neither is better in general; the best-fit method shows how to decide.
FAQ
How do I check whether a PA is authorised?
The RBI publishes lists of authorised payment system operators and payment aggregators on its website. Check the current list before you sign.
What if a PA shuts down while holding my money?
The escrow requirement is meant to protect merchant funds. Keep settlement reports so that you can prove what you are owed, and contact the PA and the escrow bank.
Can a PA ask for more documents after onboarding?
Yes. Due diligence is ongoing, and the 2025 direction required existing merchants to be brought up to the new standard.
Do these rules set MDR?
No. They require PAs to follow MDR instructions and to be transparent; MDR rules come from the RBI's card instructions, section 10A and NPCI.
Sources
- Reserve Bank of India — Master Direction on Regulation of Payment Aggregator (PA), 15 September 2025, and lists of authorised entities
- Department of Financial Services — section 10A notification and UPI MDR FAQ
- NPCI — UPI participant rules
