The Reserve Bank of India’s (RBI) proposed a stricter KYC guidelines (Know Your Customer) for Payment Aggregators (PAs) could significantly impact micro, small, and medium-sized businesses (MSMEs) and solopreneurs. The new rules mandate stricter verification procedures for merchants, including physical verification and document checks.

While the RBI intends to strengthen the financial system and prevent fraud, industry experts warn these measures may increase costs and slow down onboarding for PAs, particularly smaller ones. This could lead some PAs to avoid working with MSMEs altogether. Additionally, stricter KYC norms might push some MSMEs to bypass PAs and request direct payments, raising security concerns.

Industry bodies like the Payments Council of India (PCI) have expressed concerns about the cost-effectiveness of these guidelines and plan to approach the RBI with their feedback. Fintech founders anticipate a more cumbersome online business setup process and potential hurdles for businesses operating virtually.

It’s important to note that these are draft guidelines, and the RBI is open to industry consultation. The September 2025 deadline suggests the RBI acknowledges the implementation complexities. However, some experts view these regulations as a bureaucratic burden that may not effectively address fraud prevention. With the final guidelines yet to be determined, the impact on MSMEs and the broader payments landscape remains to be seen.

Disclaimer: This information is for general awareness only and does not constitute legal advice.