RBI’s New Master Direction on Payment Aggregators (2025)

On September 2025, RBI issued a revised Master Direction for PAs. Major fintechs like PhonePe, Paytm, and Cred have stopped offering rent payment via credit cards as a result.

What Changed?

1. Merchant-only aggregation
   • A PA can aggregate funds only for merchants with whom it has a direct contractual relationship.
   • Rent payments to landlords not registered as merchants with full KYC are now disallowed.
2. Ban on Marketplace-style PA Business
   • PAs cannot act as a marketplace themselves.
   • Their role is limited to providing payment facilitation for onboarded merchants.
3. Merchant Due Diligence
   • PAs, not acquiring banks, are now directly responsible for verifying merchant KYC.
   • Funds must be settled only into the onboarded merchant’s bank account.

Why RBI Did This?

• Prevent misuse of credit cards: Rent payments were functioning like disguised peer-to-peer (P2P) transfers.
• Curb fraud and money laundering: Fake “rent” payments were sometimes used for cash flow management or illicit transfers.
• Strengthen accountability: Ensures traceability of funds and merchant legitimacy.
• Regulatory simplification: Moves from multiple licenses and micro-rules → one unified PA licence, principle-based framework.

Impact

On Fintechs

• Loss of a high-volume, fast-growing use case (rent payments via cards).
• Reduced fee income and lower credit card transaction volumes.
• Need to re-onboard landlords as merchants → high cost, less attractive for casual landlords.

On Users

• No more earning credit card reward points / cashback on rent.
• Limited ability to convert rent into EMIs via fintech apps.
• Must switch back to bank transfers, UPI, cheques, or BBPS for rent payments.

Exam Relevance

• Payment Aggregator (PA): Entity that facilitates digital payments between merchants and customers without requiring merchants to set up their own payment infrastructure.
• Marketplace ban: PAs cannot run e-commerce-like setups; they only process payments for contracted merchants.
• KYC mandate: Full merchant verification required, strengthening AML (Anti-Money Laundering) safeguards.