INDIA Law and Practice Contributed by: Shilpa Mankar Ahluwalia, Purva Anand and Ansh Jain, Shardul Amarchand Mangaldas & Co
Payment Aggregators Payment aggregators (PAs) facilitate sale and pur - chase transactions by enabling merchants to accept payments from customers through multiple payment channels, without requiring such merchants to create separate payment integration systems. PAs receive payments from customers, pool such funds in escrow accounts and subsequently settle them with the mer - chants in accordance with agreed timelines. On 15 September 2025, the RBI issued the Reserve Bank of India (Regulation of Payment Aggregators) Directions, 2025 (the “PA/PG Guidelines”), which con - solidate and supersede the earlier regulatory frame - works governing PAs. The consolidated directions formally categorise and regulate three categories of PAs: • PA-Online (PA-O), being PAs that facilitate transac - tions where the acceptance device and payment instrument are not present in close proximity (such as e-commerce transactions); • PA-Physical (PA-P), being PAs that facilitate trans - actions where both the acceptance device and payment instrument are physically proximate (such as point-of-sale transactions); and • PA-Cross Border (PA-CB), being PAs that facilitate aggregation of cross-border payments for permis - sible current account transactions under FEMA. The inclusion of PA-P within the regulatory framework marks a significant expansion of the RBI’s supervisory remit, as physical payment aggregation was previ - ously unregulated. Non-bank PA-Ps are required to apply to the RBI for authorisation by 31 December 2025, and those that fail to do so must wind up their PA-P operations by 28 February 2026. The consolidated directions also introduce stricter merchant due diligence and KYC requirements, mandate registration with the Finan - cial Intelligence Unit-India for all non-bank PAs, and prescribe detailed requirements for escrow account operations, settlement timelines and governance.
cross-border remittances, are expected to progress, potentially offering a regulated alternative to dollar- denominated stablecoins while preserving domestic liquidity and monetary sovereignty. However, the RBI has consistently urged caution, advo - cating for Central Bank Digital Currency (CBDC) prior - itisation over privately issued stablecoins to preserve monetary sovereignty and financial stability. The RBI Governor has noted that India’s robust digital payments infrastructure, including UPI, reduces the urgency to embrace stablecoins as a payment solution. Any regu - latory framework is therefore likely to reflect this, permit - ting regulated stablecoin activity for specific use cases (such as cross-border payments and trade settlements) while continuing to develop and scale the digital rupee as the primary state-backed digital currency. Broadly speaking, the various fintech business models or verticals that are currently predominant in India are: • UPI-based services; • payment aggregators and gateways; • prepaid instruments, wallets and other stored value products; • digital lending; • cross-border payment solutions; and • money remittance products. Products pertaining to other significant aspects of fin - tech – such as insurtech, regtech and wealthtech – are scaling in the Indian market. UPI Payments UPI is a payments platform managed and operated by the NPCI, which enables real-time, instantaneous, mobile-based bank-to-bank payments. It leverages India’s fast-growing mobile and telecommunications infrastructure to offer easily accessible, low-cost and universal remittance facilities to users (see also 1.1 Evolution of the Fintech Market ). 2. Fintech Business Models and Regulation in General 2.1 Predominant Business Models
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