Payment aggregators seek more time from RBI to complete merchant re-KYC: Report

Payment aggregators have asked the Reserve Bank of India (RBI) to extend the September 15 deadline for completing re-KYC of merchants, as several players struggle to clear a backlog running into thousands of small and informal businesses, Moneycontrol reported on Friday.

The request comes as payment aggregators such as Paytm, PhonePe and Google Pay work to complete verification of merchants receiving payments through QR codes and soundbox machines across small towns and villages. The stricter KYC requirements and the need for physical verification have proved challenging for these businesses, many of which may not have adequate documentation.

According to the report, a senior executive at one of the payment aggregators said most of the affected merchants are small and informal. Their participation remains important for the regulator because of the role such businesses play in expanding financial inclusion and bringing digital payments to smaller markets.

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The RBI’s KYC requirements are aimed at enabling financial institutions to establish the identity and address of customers and help trace illegal activities, including fraud and money laundering. The latest compliance requirements follow the RBI’s updated and consolidated Master Directions issued in September 2025, which formally classify payment aggregators into three segments: PA-Online, PA-Physical and PA-Cross Border.

Although the regulator’s master directions were issued last year, giving merchants and payment companies time to comply, the scale of the exercise has created operational pressure. The report said that payment aggregators have sought additional time as they work through the verification backlog.

The challenge for PAs extends beyond reaching millions of merchants. They must also ensure that merchants understand the RBI’s KYC and merchant due-diligence requirements. Many of these small merchants account for a relatively limited share of overall payment volumes and values and are unlikely to pose significant ecosystem-level risks in terms of transaction value.

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Most payment aggregators expect to complete around 80% of the re-KYC exercise by the September 15 deadline. However, capacity constraints remain a concern because RBI rules require in-person KYC to be carried out by employees of the payment aggregator rather than third-party personnel. This has forced several players working with long-tail informal merchants to increase staffing over the past year.

The push for an extension comes amid concerns that failure to complete verification within the prescribed window could affect a large number of merchants and potentially disrupt digital payment acceptance.

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