RBI Mandates CKYCR for Merchant Onboarding by Payment Aggregators
RBI Implements Stricter Rules for Payment Aggregators
The Reserve Bank of India (RBI) has made the Central Know Your Customer Records Registry (CKYCR) the primary form of merchant onboarding for payment aggregators (PAs), sources have revealed. This decision is part of the RBI's new payments regulation aimed at strengthening the monitoring of merchant transactions to prevent illicit activities such as betting, real-money gaming (RMG), or money laundering.
As per the new guidelines, payment aggregators will only use physical documents for KYC when CKYCR is not possible or available. The RBI has stated that the decision was taken at a meeting with the fintech industry on March 27. The move places increased responsibilities on PAs regarding merchant category codes (MCC) and marketplace merchant onboarding.
Payment firms are now required to ensure that merchants accurately represent their businesses. Several offshore RMG and betting firms have been misclassifying themselves as tourism or education businesses. Earlier, banks were held responsible but lacked the resources to verify millions of merchants for a low-margin business. Now, the verification must be done by PAs.
Key Highlights of the RBI's New Regulations
| Aspect | Previous Requirements | New Requirements |
|---|---|---|
| CKYCR | Not the primary form of merchant onboarding | Primary form of merchant onboarding |
| Physical Documents | Used for KYC when CKYCR is not possible | Used for KYC when CKYCR is not possible or available |
| Merchant Category Codes (MCC) | Not explicitly mentioned | Payment aggregators must ensure accurate merchant representation |
| Marketplace Merchant Onboarding | Not explicitly mentioned | Payment aggregators must ensure accurate merchant representation |
The RBI has also revised capital requirements for PAs, with a net worth of Rs 15 crore at the time of application and Rs 25 crore within three years of authorisation. Net worth must be maintained on an ongoing basis, not just at the time of application. PAs should not facilitate person-to-person money transfer, the RBI has said.
The RBI has also widened the cross-border payment aggregator (PA-CB) definition to include Liberalised Remittance Scheme (LRS) transactions covering education, travel, and medical expenses along with e-commerce trade under FEMA. The move broadens the market opportunity for PA firms. However, PAs cannot access the central bank's database directly to verify customer LRS utilisation before accepting funds. LRS allows resident individuals to remit up to $250,000 in a financial year. PAs must rely on banks to determine if a customer has reached the annual limit.
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