RBI Grade BNABARD ESISEBI
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Why in News?
“RBI MPC Unpacked: Key Theory Meets Today’s Macro Trends”Tap to play · from the C4S channel
The Reserve Bank of India (RBI) has clarified regulatory norms for small merchant UPI transactions (P2PM). The move eases compliance requirements for fintech firms like PhonePe and Paytm, especially in the unorganised retail segment.
Key RBI Clarifications
- Peer-to-Peer Merchant (P2PM) transactions do not require a Payment Aggregator (PA) partner.
- These transactions are outside the scope of RBI’s Master Directions on Payment Aggregators (MD-PA).
- Funds move directly between customer and merchant accounts via UPI — no pooling or holding of funds.
- Due diligence responsibility lies with acquiring banks or payee Payment Service Providers (PSPs).
- Firms offering only technical infrastructure will be treated as technology service providers, not payment aggregators.
Background
- The P2PM category was introduced by NPCI in 2019.
- Typically used by small or informal merchants such as street vendors and gig workers.
- These merchants generate high transaction volumes but less than 20% of total transaction value.
- Many fintech firms have extensive QR code and soundbox networks among such merchants.
What are P2PM Transactions?
- UPI payments made by customers directly to small merchants, often in the unorganised retail sector.
- Usually involve low-value transactions and simple QR-based payments.
Difference: P2PM vs P2M
- P2PM: Direct bank-to-bank transfer; no intermediary handling funds.
- P2M (regular merchant payments): Licensed payment aggregators handle funds and settle through escrow accounts.
