Payment Aggregators Ask RBI to Extend September 15 Merchant Re-KYC Deadline
Payment aggregators have approached the Reserve Bank of India seeking an extension of the September 15, 2026 deadline for completing re-KYC of existing merchants, as the payments industry races to clear a large verification backlog involving small and informal businesses across India.
The request comes less than two weeks before the compliance deadline established under the RBI's consolidated regulatory framework for payment aggregators.
Industry participants are concerned that merchants unable to complete the required verification in time could face interruptions in their ability to accept digital payments.
The challenge is particularly significant among small offline merchants accepting payments through:
UPI QR codes,
soundbox devices,
and other digital payment infrastructure.
Small online businesses are also affected.
Payment aggregators expect to complete a large majority of the verification exercise by the deadline, but the remaining backlog could still translate into a significant number of merchants facing payment disruption.
Payment Aggregators Seek More Time From RBI
The industry's immediate request is straightforward:
extend the September 15 deadline.
Payment companies are working through a substantial backlog of merchants whose KYC and due-diligence requirements remain incomplete.
The compliance exercise follows the Reserve Bank of India (Regulation of Payment Aggregators) Directions, 2025, issued on September 15, 2025.
The consolidated framework introduced a common regulatory structure covering different categories of payment aggregation and strengthened requirements governing merchant due diligence.
Existing merchants onboarded before the new framework were given a transition period to comply with the updated requirements.
That transition is now approaching its end.
September 15 Deadline Is Critical for Existing Merchants
The RBI's framework effectively requires payment aggregators to bring merchants onboarded under the previous regime into compliance with the updated KYC requirements by mid-September 2026.
For merchants that remain unverified after the transition period, payment acceptance could be paused until the required verification is completed.
That creates an important operational issue.
A merchant may still have:
customers,
a bank account,
a QR code,
and an otherwise functioning business,
but an incomplete KYC process could interfere with the payment aggregator's ability to continue providing payment services.
For small businesses that depend heavily on digital transactions, even a temporary interruption could affect daily sales and cash flows.
Around 30–35% of Small Offline Merchants Could Miss Deadline
The scale of the potential backlog is significant.
Industry estimates indicate that approximately:
30% to 35% of smaller offline merchants
using QR-based payment infrastructure could potentially fail to complete the required verification within the deadline.
The challenge is concentrated particularly among India's long tail of informal merchants.
These can include:
small retailers,
local service providers,
independent vendors,
micro-enterprises,
and businesses operating in smaller towns and rural markets.
Many such merchants adopted digital payments because the onboarding process was relatively simple.
Bringing this enormous merchant base into a more detailed regulatory framework is proving operationally complex.
Around One Million Small Online Businesses Could Also Be Affected
The issue extends beyond physical stores.
Approximately:
one million small online businesses
have also been identified as potentially being at risk of missing the verification window.
Online merchants can include:
small ecommerce sellers,
digital businesses,
independent service providers,
app-based businesses,
and other entities receiving payments through payment aggregators.
The RBI framework covers multiple payment-aggregation models rather than focusing exclusively on physical UPI merchants.
This makes the re-KYC exercise a broad compliance project across India's digital-payments ecosystem.
Most Payment Aggregators Expect Around 80% Compliance
Despite the remaining backlog, payment companies have made substantial progress.
Industry executives expect most payment aggregators to achieve approximately:
80% completion
of the re-KYC exercise by the September 15 deadline.
That means the majority of merchants are expected to transition successfully.
However, India's merchant ecosystem is so large that even the remaining percentage can represent a substantial number of businesses.
The industry's concern therefore centres less on the overall compliance percentage and more on the absolute number of merchants that could lose payment access.
Small and Informal Merchants Face the Greatest Challenge
Large businesses generally maintain extensive corporate documentation.
A large merchant is more likely to have readily available:
registration documents,
tax information,
ownership records,
business addresses,
authorised signatory details,
and formal corporate structures.
A small informal merchant can operate very differently.
Some businesses may be run by individuals with limited formal documentation.
Others may have difficulty demonstrating business ownership, beneficial ownership or other information required under enhanced merchant due diligence.
That creates a fundamental implementation challenge.
The payment ecosystem has expanded rapidly partly because digital payment acceptance became accessible to even very small businesses.
The regulatory framework now needs to verify those businesses without unnecessarily reversing that financial-inclusion progress.
Physical Verification Creates Operational Pressure
Another major challenge is the requirement for physical verification in applicable cases.
Payment aggregators cannot simply depend on mass digital document collection for every merchant.
Certain verification processes require an on-ground assessment of the business.
The industry has consequently had to build and expand internal field capacity.
Reaching merchants across:
large cities,
Tier 2 markets,
Tier 3 towns,
small communities,
and rural areas
creates significant logistical requirements.
A merchant base distributed across the entire country cannot be physically verified overnight.
Third-Party Verification Restrictions Add to the Challenge
The compliance process becomes more demanding because physical verification cannot simply be outsourced without restriction.
Under the applicable framework, required physical verification has to be performed in accordance with RBI-prescribed processes, with payment aggregators needing to maintain direct control over important parts of the merchant verification exercise.
This has pushed companies to expand their own verification and compliance capabilities.
For large payment platforms managing millions of merchant relationships, that means recruiting, training and deploying substantial operational resources.
The deadline therefore represents not only a documentation challenge but also a workforce and logistics challenge.
Why RBI Strengthened Merchant Due Diligence
The stricter verification framework serves an important regulatory purpose.
Payment aggregators sit between customers, merchants, banks and payment systems.
Weak merchant verification can create opportunities for:
fraud,
money laundering,
misrepresentation,
illegal businesses,
and misuse of payment infrastructure.
KYC allows regulated entities to establish who they are dealing with.
Merchant due diligence goes further by helping payment aggregators understand:
the nature of a merchant's business,
its ownership,
its location,
and whether its activities correspond with the information provided during onboarding.
The objective is to make the payments ecosystem safer as it grows.
RBI Consolidated Payment Aggregator Rules in 2025
The current compliance exercise stems from the consolidated regulatory framework issued by the RBI in September 2025.
The directions rationalised payment aggregator regulation and formally brought together requirements across three broad categories:
PA-Online,
PA-Physical,
and:
PA-Cross Border.
PA-Online businesses facilitate payments in ecommerce and other online environments.
PA-Physical businesses facilitate face-to-face or proximity transactions.
PA-Cross Border businesses facilitate eligible cross-border payment transactions.
Bringing these activities under a more consolidated regulatory architecture allows the RBI to apply clearer standards across a rapidly evolving payments market.
New Merchants Already Face Updated KYC Requirements
The September 2026 deadline principally matters for merchants that were already part of the ecosystem before the new framework took effect.
For newer merchants, the transition works differently.
Merchants onboarded from the beginning of 2026 are required to satisfy the updated KYC requirements as part of their onboarding process.
This means the industry is effectively managing two major compliance tasks simultaneously:
ensuring new merchants meet current requirements
while:
updating millions of older merchant relationships.
The second task is much more difficult because the historical merchant base was accumulated over years.
UPI's Success Makes Re-KYC More Complex
The size of the problem is partly a consequence of India's extraordinary success in digital payments.
UPI and QR-code payments have enabled even very small businesses to accept digital transactions.
A roadside merchant can display a QR code.
A small neighbourhood shop can receive instant payments.
Businesses that once depended almost entirely on cash can participate in the formal digital-payment ecosystem.
That scale is valuable.
But it also means regulatory changes can affect an exceptionally large and diverse merchant population.
A compliance process that would be manageable for several thousand businesses becomes much more challenging when applied across millions.
Payment Companies Warn About Potential Disruption
The central concern raised by the payments industry is continuity.
If large numbers of merchants remain non-compliant when the deadline arrives, payment services could be interrupted for those businesses.
The impact would not necessarily be evenly distributed.
Larger and more formal merchants are generally better positioned to complete verification.
The greatest disruption could therefore fall on:
micro-merchants,
informal businesses,
small online sellers,
and businesses in less accessible locations.
These are also segments where digital payments have played an important role in expanding financial inclusion.
Google Pay Is Asking Merchants to Complete Verification
The approaching deadline is already visible at the merchant level.
Google Pay for Business, for example, is asking affected merchants to complete KYC before September 15, 2026 to avoid interruptions in payment processing.
The verification process can vary according to factors including:
business type,
annual turnover,
and merchant classification.
This illustrates how RBI's regulatory framework is being translated into operational requirements by payment platforms.
Merchants receiving verification requests therefore need to treat them as compliance requirements rather than routine application updates.
Merchant Size Influences Verification Requirements
The framework recognises that merchants differ significantly in scale.
A micro-retailer receiving relatively small payments does not have the same business structure as a major ecommerce company processing enormous transaction volumes.
Payment platforms can therefore apply verification requirements based partly on factors such as merchant category and turnover.
For example, merchants crossing specified turnover thresholds can face additional verification requirements.
This risk-sensitive approach helps balance two objectives:
making small-business participation practical
while:
applying stronger controls as transaction scale increases.
Re-KYC Is Different From Customer UPI KYC
The current issue should not be confused with ordinary consumers using UPI.
The September 15 exercise concerns:
merchant verification by payment aggregators.
It is not a blanket requirement for every individual UPI user to perform re-KYC by that date.
The affected businesses are merchants receiving payments through payment-aggregation infrastructure.
This distinction is important because India's digital-payment ecosystem includes multiple participants with different regulatory responsibilities.
Extension Would Give Industry More Time to Clear Backlog
If the RBI grants additional time, payment aggregators would be able to continue working through the remaining merchant base without immediately suspending payment acceptance for businesses that have not completed verification.
An extension could reduce the risk of abrupt disruption.
It would also provide additional time for merchants to:
collect documents,
respond to verification requests,
complete physical checks,
and resolve rejected or incomplete submissions.
However, an extension would not eliminate the underlying compliance obligation.
Merchants would still need to complete re-KYC.
It would simply provide a longer transition period.
RBI Must Balance Compliance and Financial Inclusion
The regulator faces an important policy trade-off.
Strong KYC requirements protect the financial system.
But abrupt exclusion of large numbers of small merchants can create its own economic and financial-inclusion costs.
The optimal approach must therefore balance:
security
with:
continuity.
The payments industry is effectively asking the RBI to preserve the new compliance standard while providing additional implementation time.
Whether the regulator accepts that argument will determine how much pressure remains on payment aggregators and merchants during the final days before the deadline.
Merchants Should Not Assume an Extension Will Be Granted
For businesses, one point remains particularly important:
an extension request is not the same as an extension.
As of the current industry representations, the applicable deadline remains:
September 15, 2026.
Merchants should therefore continue completing requested verification rather than delaying the process in anticipation of regulatory relief.
Businesses that have already completed re-KYC generally do not need to repeat the exercise merely because the deadline is approaching.
Those with outstanding verification requests should follow the instructions provided by their payment service provider.
Conclusion
Payment aggregators' request for an extension of the September 15 merchant re-KYC deadline highlights the challenge of applying stronger financial-compliance standards across India's enormous and highly diverse digital-payments ecosystem.
Most payment aggregators are expected to complete roughly 80% of the exercise, but the remaining backlog could still leave a significant number of businesses exposed to payment interruptions.
The challenge is particularly acute among small and informal merchants, with industry estimates suggesting 30–35% of certain small offline merchants could struggle to meet the deadline, while around one million small online businesses may also be at risk.
For the RBI, the decision involves balancing stronger merchant due diligence against the possibility of disrupting businesses that have become increasingly dependent on digital payments.
Until the central bank formally announces otherwise, however, September 15, 2026 remains the critical compliance deadline, making completion of outstanding re-KYC requirements the safest course for affected merchants.