Payment Bank License

Regulations by RBI for PoS Activities of Payment Aggregators

POS Activity

The Reserve Bank of India (RBI) recently released preliminary rules for payment aggregators that enclose various aspects, including point-of-sale or PoS activities. The banking regulator requested public feedback on the updated directions, which contained revisions to existing rules, until 31st May 2024. In September 2022, the RBI issued specific directives regarding developmental and regulatory policies for offline payment aggregators that process in-person payments.

The first deals with the activities of offline payment aggregators, whereas the second deals with expanding the scope of safety instructions for Know Your Customer, the due diligence of onboarded merchants, and operations in Escrow accounts.

What are Payment Aggregators?

A payment aggregator is a provider that combines multiple payment methods, such as cards, UPI, net banking, wallets, and alternative credit options, from different processing entities onto one platform. A merchant can connect with a PA to offer customers a variety of payment choices when they make a purchase.

In simple words, a PA gives merchants access to several payment methods for customers to choose from when making a purchase. A payment aggregator is also responsible for fund settlement and transferring money from banks and other issuing entities to merchants.

What are PoS activities?

Point-of-sale activities are the platforms where the customer completes payment for a product or service in your store. Each time a sale is made, a customer finalizes a point-of-sale transaction. The most recent POS software is significantly stronger than regular credit card transactions. Currently, systems provide mobile integrations, contactless payment options, e-commerce integrations, and additional features.

In simple words, PoS activities are the core of your business, serving as the connection between sales, inventory management, payment processing, and customer management. A POS system ensures seamless coordination between all your operations, and it is crucial to have your software and hardware ready well in advance.

What are the Benefits of PoS Activities?

 It can be valuable to understand the concept of point of sale discussed above, but knowing its advantages for your business is even more essential. Purchasing any items through POS activities comes with many benefits. There are several advantages to installing a POS system for your retail business mentioned below for your better insight:

1. Inventory Management System

The PoS system has made it easy to track inventory by allowing you to manage your inventory in real time and know the number of products you own in a given period.

Upon receiving your inventory, you can easily add products to your catalogue by scanning the items, inputting quantities, and automatically recording them in your POS software inventory. This saves a significant amount of time compared to manually tracking your inventory.

2. Easy Invoicing

The point-of-sale system allows the recording and grouping of all invoices. There are other categories of invoices to manage the company; it is also important to easily determine them. The invoices can be created for purchases, repairs, sales, rentals, consignments and other software.

The buyer can find important details in the invoice, including the transaction amount, quantity of goods, and item descriptions.

3. Fast Payments

The PoS activities help the payment process go faster. From selecting the products the consumer wants to buy to calculating the price of the products automatically, the bill can be emailed or printed instantly using a receipt printer.

Depending on the integrations and terminal being used, customers have the option to make payments with cash, credit, or debit cards. This allows the customer to finalize the transaction quickly and easily.

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4. Strong Customer Management

The advantage of a POS system is that it enables you to record customers’ details within the system. Access to customer data, such as their name, phone number, purchases, email, etc., provides a more comprehensive understanding of your target market and customer segments, such as new or loyal customers.

You can send promotions to your customers to encourage them to visit your store more frequently or to establish customer loyalty. The system can assist you in monitoring individual customers to provide specific promotions.  

5. High Level of Security

 Ensuring the protection of a company’s data is crucial. Only authorized users within the company should have access to your data. With PoS activities in place, your data is protected from unauthorized access. Many systems provide dual-user authentication. This decreases the intrusion of evil users into your system.

Additionally, the administrator can easily approve or deny user access. To ensure constant backup and protection of your data, utilize a cloud-based point-of-sale system.   

Rationale Behind RBI’s New Draft Regulation for PoS Activities

The quick expansion of third-party PoS operators in the offline payments industry has sparked various concerns that justify regulatory action. The main focus of these concerns mainly centres on three important areas:

1. Encashment of Loans on Credit Cards

In the informal sector, there has been an obvious rise in cash loans provided via PoS transactions. This pattern highlights the possible dangers of unregulated cash transactions and the importance of strong Know Your Customer procedures.

2. Practice for Data Storage

POS transactions require the management of delicate customer data. Differences in how operators store data are causing worries about data security, privacy, and meeting regulations.

3. Management of Fund

Settlement procedures between third-party providers and retailers frequently have delays, raising concerns about fund handling, cash management, and liquidity risks.

Proposed Regulatory Framework for Licensing PoS Activities

The RBI is examining adopting a licensing framework designed for PoS activities to address concerns and ensure fair competition. The primary elements of the proposed framework consist of:

1. Minimum Net Worth

To ensure financial stability and viability, PoS activities must have a net worth of at least Rs 25 crore.

2. Fit Criteria

The RBI will assess the suitability of PoS activities using fit and proper criteria, including governance, integrity, and competence.

3. Oversight & Compliance

The significance of the framework would be on regulatory compliance, security measures, and oversight to reduce risks and improve consumer protection.

Recent Update by RBI on PoS Activities of Payment Aggregators

In September 2022, RBI declared rules for offline payment aggregators that manage proximity or face-to-face payments. The regulator has requested input on the preliminary circular by May 31, 2024. The new rules require PA-P face-to-face or proximity payment transactions banks to follow the official regulations within three months of publication, while non-bank entities offering PA-P services must notify the RBI of their desire to become authorized within 60 days of the circular’s release and submit an application by May 2025.

Here are the points mentioned below about the RBI’s latest update on the draft regulations for PoS activities for payment aggregators:

  • New draft directions try to shelter the physical PoS activities of payment aggregators. Certain amendments to existing directions are contemplated regarding the growth in digital transactions in the country and the important role played by payment aggregators.
  • The new update focuses on enhancing the payment system by knowing your customer regulations and activities related to escrow accounts.
  • The RBI has also come up with a proposal for Non-banking Financial Companies (NBFC) to provide payment aggregators PoS services (like Razor Pay & Amazon Pay) mandated to have a minimum net worth of Rs. 15 Crore at the time of applying for authorisation.
  • Those companies rendering PoS services also need to maintain a minimum net worth of Rs.25 Crore as of 31 March 2028, and it will need to be maintained at all times thereafter.
  • These rules will also apply to the new Non-banking Financial Companies (NBFC), which are entities that commenced their operations before the date of this particular circular.
  • They also need to maintain a minimum net worth of Rs.15 Crore at the time of registering for the RBI authorisation and acquire a minimum net worth of Rs. 25 Crores by the end of the 3rd financial year for the grant of authorisation. These businesses will also maintain a minimum net worth of Rs.25 Crore at times.
  • Any entity granted a Certificate of Incorporation on 1st October 2025 to achieve a net worth of Rs.25 Crore by 31st March 2028.
  • The proposed rules require payment aggregators to ensure that the marketplaces they work with do not handle payments for services they did not provide.
  • The payment aggregator points of sale that fail to abide by the net worth requirement or do not apply for authorisation within the deadline need to wind up aggregating activity by 31 July 2025.
  •  The RBI has also added that the banks shall close accounts used for payment aggregator activity of a non-bank PA-P for existing as of this circular by 31st October 2025 unless such PAs can produce evidence related to the application for authorisation submitted to RBI.
  • Feedback or comments on the draft directions may be sent by post or e-mail to the Chief General Manager-in-Charge, Department of Payment and Settlement Systems, RBI, Central Office, 14th Floor, Shahid Bhagat Singh Marg, Mumbai- 400001 before the deadline according to the RBI.
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What are the Challenges & Opportunities for the Stakeholders?

Although the proposed licensing framework offers regulations and benefits for managing risks, it also brings challenges and opportunities for stakeholders:

1. Cost of Compliances

Operators in the PoS activities could encounter higher expenses related to licensing, regulatory reporting, and audit obligations. It is essential to find a balance between operational efficiency and regulatory obligations.

2. Integration of Technology

POS activities might have to invest in technology upgrades, cybersecurity measures, and interoperable solutions to comply with regulatory requirements and meet industry standards.

3. Competition in the Market

The system for granting licenses can potentially change how the market operates, promoting competition, creativity, and consolidation in the PoS sector. Players who have strong compliance frameworks and focus on customer needs may have a competitive advantage.

4. Trust of the Customer

Increased regulatory supervision and compliance with security protocols can strengthen consumer confidence in digital payment systems. Open and honest communication, information security, and conflict resolution methods are necessary for keeping trust and loyalty intact.

International Insights & Optimal Strategies for PoS Activities

The development of POS regulations in India mirrors international trends and best practices in other regions. Regulatory agencies around the globe prioritize risk-focused monitoring, safeguarding customers, and promoting innovation. India can improve its regulatory approach by studying international experiences and focusing on convergence, collaboration, and continuous improvement.

The RBI’s proposal for a licensing framework for POS players demonstrates a proactive effort to tackle changing challenges and opportunities in the digital payments industry. The proposed framework establishes a stable, effective, and all-encompassing environment for POS activities by promoting regulatory transparency, managing risks, and ensuring industry resilience. Regulators, operators, merchants, and consumers in the POS industry must work together to adapt to regulatory changes, promote innovation, and maintain industry standards.

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In the end, with the help of technology investments, strategic partnerships and regulatory compliance in the PoS sector. The POS sector has the potential to significantly impact India’s goal of a digitally empowered economy. Continuous communication, feedback, and involvement of stakeholders are crucial in shaping a regulatory framework that promotes financial stability and innovation and enhances consumer trust in digital payments as regulations change.

We have already discussed the essential rules that comprise rigorous licensing, compliance with global data security norms, compulsory maintenance of an escrow account, and strong customer complaint mechanisms. These measures are designed to safeguard the interests of both merchants and consumers while promoting a secure digital payment space.


  1. Which payment aggregators are registered with the Reserve Bank of India?

    The RBI has developed first-hand guidelines on payment aggregator licenses. Pas like Razorpay, Cashfree, and Open were the first players to get regulatory approval from the RBI.

  2. What is the difference between payment aggregators & payment gateway?

    A payment gateway can help secure customer payment data from an app or website to the payment processor, whereas a payment aggregator simplifies the payment process by uniting multiple merchant accounts into a single account.

  3. What are the guidelines for payment aggregators?

    RBI has issued guidelines for payment aggregators, emphasizing customer protection, security, and fraud prevention.

  4. Which payment system is operated by RBI?

    The RBI operates certain payment systems, such as credit cards, NEFT, UPI, wallets, and Adhaar-based payment systems.

  5. Which platform regulates payment applications in India?

    The platform regulating payment applications in India is the National Payment Corporation of India (NPCI), an umbrella organisation that operates retail payments and settlement systems in India.

  6. What is an online PoS transaction?

    The point of sale (PoS) is the place where a customer executes the payment for goods or services and where sales taxes may become payable.

  7. Which body regulates account aggregators in India?

    The body that regulates account aggregators in India is the Reserve Bank of India (RBI), which helps any individual securely and digitally access and share information from one financial institution.

  8. What is the limit set for the PoS activities?

    The limit set for PoS activities is the maximum expense you can make using your debit card at the PoS terminals, up to Rs.20,000 per day as the maximum transaction limit.

  9. What are the payment system standards in India?

    The payment system standards in India are the technical specifications and guidelines that define the payment transactions that are initiated, settled, and processed.

  10. What are the types of PoS activities applicable in India?

    Three types of PoS activities are applicable in India: tablet-based, legacy and cloud-based PoS systems.

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