RBI Ends Year-Long Wait, Grants Six Payment Aggregator Licences

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After more than a year of anticipation, the Reserve Bank of India (RBI) has finally given its approval for at least six payment aggregator licences, signaling the end of the ban on entities such as RazorPay and Cashfree Payments from onboarding new merchants. The central bank had imposed temporary restrictions in December 2022, instructing platforms with in-principal approvals, including RazorPay, Cashfree Payments, PayU, PineLabs, Paytm, and Stripe, to halt merchant onboarding until additional documents and audit reports were submitted for final license consideration.

Approval Recipients

The latest nod for payment aggregator licenses has been granted to Razorpay, Cashfree Payments, Open Financial, EnKash, Google Pay, and Paymate India. Paytm and PayU India are still awaiting their final approvals, according to industry sources. Prior to the temporary restrictions, Razorpay, PayU India, and Cashfree accounted for 70-80% of new merchant onboarding. These entities had initially received their in-principal licenses from July 2022 onwards.

Operational Impact

Following the receipt of final approval, RazorPay and Cashfree Payments announced their readiness to onboard new merchants on their payment gateways. Both companies reported having a pipeline of merchants with completed KYC processes, eagerly awaiting the lifting of the ban to join their platforms.

Regulatory Framework

As of December 16, the central bank had granted in-principle authorization to 37 existing payment aggregators, including Zomato, Amazon Pay, NSDL, and PhonePe. Additionally, six applications, including one for Freecharge, are still ‘under process.’ The RBI had introduced the payment aggregator framework in March 2020, mandating that payment gateways obtain an aggregator license to facilitate merchant onboarding and provide digital payment acceptance solutions.

Payment aggregators play a crucial role in enabling e-commerce websites, mobile apps, and merchants to accept various payment instruments from customers without the need for merchants to create their own payment interfaces.

Questions Related to Exams

Q: Why did the RBI impose a ban on payment aggregator licenses for entities like RazorPay and Cashfree Payments?

A: The RBI imposed a ban in December 2022, instructing platforms with in-principal approvals to stop onboarding new merchants until additional documents and audit reports were submitted for final license consideration.

Q: How many payment aggregator licenses were granted by the RBI, and to which companies?

A: The RBI granted at least six payment aggregator licenses, including Razorpay, Cashfree Payments, Open Financial, EnKash, Google Pay, and Paymate India.

Q: What is the operational impact of the RBI’s approval on RazorPay and Cashfree Payments?

A: With the final approval, RazorPay and Cashfree Payments can now onboard new merchants on their payment gateways. Both companies have a pipeline of merchants awaiting onboarding.

Q: Which companies are still awaiting final approval for payment aggregator licenses?

A: Paytm and PayU India are still awaiting their final approvals, according to industry sources.

Piyush Shukla