Payment aggregators seek RBI extension for merchant re-KYC deadline

MUMBAI: The KYC clock is ticking, and payment aggregators are asking the Reserve Bank of India (RBI) for a little more time to beat it, with thousands of merchants still waiting to complete mandatory re-verification ahead of the September 15 deadline.

According to Moneycontrol, payment aggregators have approached the RBI seeking an extension as companies grapple with a sizeable compliance backlog spanning online and offline businesses. The concern is that merchants who fail to complete the process could face difficulties in receiving digital payments.

The pressure is particularly acute among small and informal offline businesses using UPI QR codes and soundbox devices. Moneycontrol had earlier reported that around 30-35 per cent of these merchants could potentially miss the deadline. Separately, about one million small online businesses are also considered at risk of missing the verification window.

For payment companies, the problem is not simply finding a missing document. The exercise involves reaching merchants in small towns and villages, explaining the tighter requirements and completing the necessary checks, a particularly cumbersome task for businesses operating on the long tail of India’s digital payments network.

The re-KYC drive follows the RBI’s updated and consolidated Master Directions issued in September 2025, which classified payment aggregators into three categories: PA-Online, PA-Physical and PA-Cross Border.

The rules have also made the exercise more manpower-intensive. In-person KYC must be conducted by employees of the payment aggregator, rather than third-party agencies. Companies serving millions of smaller merchants have consequently had to expand their teams over the past year to carry out physical verification.

Offline merchant-acquiring businesses such as Paytm, PhonePe and Google Pay have particularly large bases of small merchants relying on QR codes and soundboxes, making physical verification a significant operational challenge.

The industry, however, does not expect the backlog to translate into a major shock for overall payment volumes. Payment companies estimate they can complete around 80 per cent of merchant re-KYC by September 15. Those likely to remain outside the completed pool account for relatively small shares of overall transaction volumes and values.

One payment aggregator founder and CEO told Moneycontrol that the RBI had taken a pragmatic approach to implementation challenges and engaged with the industry when disruption risks emerged. Another payments executive said balancing regulatory requirements with practical execution had helped India’s digital payments ecosystem continue expanding.

That leaves aggregators facing a numbers game of a different kind: getting millions of merchants through a detailed verification exercise before the calendar runs out, even if the merchants left behind represent only a small slice of the country’s overall payment value.