Payment Aggregators Seek RBI Extension For Merchant Re-KYC Deadline

Payment aggregators have requested an extension to the September 15 deadline for completing merchant re-KYC, as they grapple with an overwhelming verification backlog involving thousands of merchants in both online and offline sectors. According to Moneycontrol, firms are encountering difficulties in conducting physical verifications and documentation checks, which could potentially disrupt digital payment services.

The challenge is particularly acute for small merchants who rely on QR codes and soundbox devices for UPI payments. Industry projections indicate that 30-35% of these small, informal offline merchants may fail to complete the necessary verification within the stipulated timeframe.

Numerous small online businesses are also at risk of missing the re-KYC window. Companies like Paytm, PhonePe, and Google Pay, which manage millions of merchant relationships in smaller towns and rural areas, are facing significant hurdles due to documentation requirements. Payment industry executives note that the Reserve Bank of India (RBI) has historically demonstrated flexibility in addressing implementation challenges, and may consider a pragmatic approach while striving to balance regulatory obligations with the goal of financial inclusion.

KYC, or know your customer verification, is a mandatory procedure for financial institutions to authenticate customer identities and thwart fraud and money laundering activities.

The re-KYC mandate stems from RBI's revised Master Directions issued in September 2025, which categorized payment aggregators into three groups: PA-Online, PA-Physical, and PA-Cross Border. Despite having ample time to adhere to the new regulations, payment firms have encountered obstacles in reaching out to numerous informal merchants and ensuring their comprehension of the required procedures.

The RBI framework mandates in-person verification to be performed by the employees of payment aggregators, rather than third-party agencies. This has compelled companies to augment their workforce and allocate additional resources to successfully complete merchant verification. Industry insiders suggest that most large merchants and high-volume businesses are expected to fulfill the process on schedule. However, smaller QR-based merchants may encounter delays, as many lack the requisite documentation.