Demand grows stronger to extend merchant re-KYC deadline:Payment aggregators write to RBI fearing impact on more than 30% of small offline merchants

Payment aggregators (PAs) have requested the Reserve Bank of India (RBI) to extend the September 15 deadline for completing merchants’ re-KYC. The KYC process for thousands of merchants across both online and offline sectors remains pending. If the deadline is not extended, digital payment services in the country could be at risk of disruption. Millions of Small Businesses Face the Risk of Closure According to reports, around 30 to 35 percent of small and informal offline merchants using QR codes for UPI payments may be unable to complete the process within the stipulated time. In addition, nearly 1 million small online business entities are also likely to miss the verification deadline. A Major Challenge for Paytm, PhonePe and Google Pay Offline merchant-acquiring companies such as Paytm, PhonePe, and Google Pay have millions of small merchants in small towns and villages who use their QR stands and soundboxes. These companies are facing considerable difficulties with stringent KYC standards and physical verification, as many small traders do not have complete documentation. Stricter regulations have increased practical difficulties The founder and CEO of a payment aggregator said, “The RBI has always understood the practical challenges of implementation and has actively engaged with the industry wherever it has identified a risk of disruption.” Payment aggregators believe that small merchants are extremely important to the goal of financial inclusion, so there is a strong possibility that the regulator will provide relief. Staff shortages and the requirement for in-person verification This KYC issue has emerged following the Master Directions issued by the RBI in September 2025. Under the new rules, payment aggregators were divided into three categories-PA-Online, PA-Physical, and PA-Cross Border. According to RBI regulations, in-person KYC can be conducted only by the payment aggregator’s own employees, not by a third-party agency. As a result, companies have had to deploy additional employees, leading to capacity constraints. Digital Payments Will Not Be Significantly Affected Although these merchants are large in number, their contribution to the overall payment value and volume is very small. Therefore, there will be no major financial impact on the overall payment ecosystem. Most payment aggregators are in a position to complete around 80 percent of the re-KYC process by the deadline. What Is KYC? KYC, or ‘Know Your Customer,’ is a verification process. Through it, banks and financial institutions verify the identity and address of their customers or merchants. Its main objective is to prevent fraud, money laundering, and other illegal activities within the financial system.