Razorpay Pauses Onboarding New Merchants Following RBI Order

SUMMARY

Along with Razorpay, the central bank has also asked Stripe and Cashfree Payments to stop on-boarding new merchants

The central bank said that while the companies have been granted an in-principle approval for payment aggregator licence, they will have to conduct an audit in six months

We are now required to share additional details with the RBI to aid in the final licence process: Razorpay

Fintech unicorn Razorpay has paused onboarding new merchants to its payment gateway business based on a communication received from the Reserve Bank of India (RBI).

“As part of the process for the final authorisation of our PA/PG licence for which we received the in-principle approval from the RBI in July, we are now required to share additional details with the RBI to aid in the final licence process. As part of this process, the RBI has suggested us to temporarily withhold onboarding new online merchants till such details are submitted,” a Razorpay spokesperson said.

Along with Razorpay, the central bank reportedly also asked Stripe and Cashfree Payments to stop onboarding new merchants.

However, Stripe denied receiving any such communication from the RBI. In a statement, it said, “We haven’t received any communications from the RBI asking us to pause onboarding. We look forward to continuing to operate in India and help Indian businesses process their payments, support their subscription business models, and combat fraud.”

As per a Moneycontrol report, the RBI in its communication said that while the companies were granted an in-principle approval for payment aggregator licence, they would have to conduct an audit within the next six months to get a final nod.

“We would like to emphasise that this has no impact on Razorpay’s existing business operations and current merchants. Also, we continue to onboard new businesses on other Razorpay services – RazorpayX, Corporate Card, and Offline payments via Ezetap,” the spokesperson added.

Payment startups including Razorpay and Stripe received an in-principle approval from the RBI for a payment aggregator licence in July this year. Later in September, Cashfree Payments also received an in-principle approval from the RBI to operate as a payment aggregator.

Launched in 2020, the payment aggregator framework mandates that only companies which receive the RBI’s approval can offer payment services to merchants.

Under the requirements of the licence, payment aggregators are expected to show a net worth of INR 15 Cr on the date of their application, or as of FY21. The companies are also required to show a net worth of INR 25 Cr by the end of FY23.

Over the past few months, multiple startups like PayMate, Open, and SabPaisa have received in-principle approvals from the RBI for payment aggregator licence. Incidentally, the RBI refused to allow a payment aggregator (PA) licence to fintech unicorn Paytm.

The online payment aggregator guidelines will be extended to offline players as well, RBI Governor Shaktikanta Das said in September during the monetary policy speech.

The current regulations do not cover offline payment aggregators (platforms that handle face-to-face transactions, especially point-of-sale (PoS) platforms).

As both online and offline payment aggregators undertake the same nature of activities, the current regulations will apply to offline players as well, Das added.