The Next Chapter in India’s UPI Story: Regulation Meets Innovation
India's digital payments landscape has seen remarkable growth, with the Unified Payments Interface (UPI) processing over 21 billion transactions monthly by late 2025, representing nearly half of global real-time digital payments. This expansion has been supported by robust online and offline acceptance infrastructure, such as QR codes and POS terminals, transforming India into a global leader in digital transactions.
Prior to 2025, the Reserve Bank of India's (RBI) Guidelines on Regulation of Payment Aggregators and Payment Gateways (issued in March 2020) applied exclusively to online transactions. As a result, offline payment aggregators that enable in-person transactions through POS terminals and QR codes remain outside the regulatory framework. This has led to inconsistencies in oversight, risk management, and consumer protection across the payment’s ecosystem.
To address this regulatory gap and align with its Payments Vision 2025, the RBI issued the Reserve Bank of India (Regulation of Payment Aggregators) Directions, 2025 on September 15, 2025. This consolidated Master Direction repeals earlier guidelines and introduces a unified framework, bringing Payment Aggregators - Physical (PA-Ps) under direct regulation alongside online Payment Aggregators (PA-Os).
Key Features of the New Framework
PA-Ps facilitate face-to-face ("proximity") transactions where the payment instrument and acceptance device are in close physical proximity. Which places POS operators and QR code facilitators under the same oversight as online Payment Aggregators (PA-Os).
•Authorisation Requirements -Entities solely engaged in PA-P activities must seek RBI authorisation by December 31, 2025. Existing authorised PAs expanding into PA-P may continue operations after notifying RBI and securing updated authorisation.
• Governance and Operation -The directions ensure parity by mandating principle-based obligations, such as maintaining an escrow account, adhering to clear rules for permissible debits and credits, and complying with end-of-day balance requirements. Settlement timelines are negotiable but must adhere to standards of fairness and transparency.
• Merchant Onboarding and KYC -Payment Aggregators (PAs) are responsible for conducting due diligence, including KYC verification and ongoing transaction monitoring. Simplified KYC requirements apply to small merchants with a turnover of up to ₹40 lakh, or export turnover up to ₹5 lakh. Settlement of funds must occur exclusively to the onboarded merchant’s designated account, with each transaction uniquely tagged for traceability.
• Risk Management and Reporting -Mandatory frameworks for dispute resolution, security, and risk mitigation must be implemented. Additionally, Payment Aggregators are required to obtain quarterly escrow certifications, submit monthly reports to the RBI, and undergo annual audits by CERT-In-empanelled auditors.
Implication for the Ecosystem
The uniform standards promote sustainable growth by enhancing merchant acceptance infrastructure. FinTech offering full-stack solutions, such as Razorpay and Pine Labs, can now scale seamlessly across online and offline channels. While smaller offline aggregators may face short-term compliance challenges, the framework strengthens fund security, oversight, and systemic stability, fostering innovation and greater trust.
India's shift from a cash-dominant economy to a digital payment’s powerhouse underscores the value of pragmatic regulation. The RBI's balanced approach in these 2025 Directions safeguards the ecosystem while encouraging innovation. FinTech prioritising embedded compliance will be well-positioned to drive further growth and advance financial inclusion.
