1 day ago
RBI KYC Deadline Threatens UPI Access For Small Merchants
The Reserve Bank of India wants businesses that accept digital payments to update their identity documents.
This process is called KYC, which means checking who the business is.
Many small shops use QR codes to accept UPI payments.
Some of these shop owners may not have the documents or knowledge needed to finish KYC.
If they miss the deadline, their ability to accept payments could be paused.
Payment companies are sending more employees to help complete the checks.
Businesses using soundbox devices are expected to do better than smaller QR-code merchants.
Overall, payment companies expect most merchants to finish the process, so the wider effect may be limited.
Industry estimates indicate 30-35% of small offline QR-code merchants could miss the September 15 KYC deadline.
Nearly one million small online businesses may face difficulty completing the required verification.
Merchants that do not complete re-KYC could have their payment acceptance facilities suspended.
Payment firms must use their own employees for in-person verification, creating operational challenges.
Industry sources expect 80% of merchant re-KYC to be completed, with 85-90% of soundbox merchants likely to comply.
- Who
- The Reserve Bank of India, payment aggregators, payment companies and small online and offline merchants.
- What
- Payment aggregators are completing revised re-KYC verification for existing merchants before a September 15 deadline.
- Where
- Across India’s online, offline and cross-border digital payments networks.
- When
- The deadline is September 15; the updated framework followed the RBI’s consolidated Master Directions issued in September 2025.
- Why
- The RBI aims to standardize merchant KYC requirements, while payment firms must verify merchants to retain their payment acceptance facilities.
Regulatory Standardization
Small-Business Disruption Concerns
Purpose of KYC rules
Regulatory Standardization
The RBI’s revised framework is intended to standardize KYC requirements across online, physical and cross-border payment aggregators.
Small-Business Disruption Concerns
Industry executives say many small and informal businesses lack the documents and familiarity needed to satisfy the requirements.
Effect of missed deadline
Regulatory Standardization
Suspending payment acceptance for noncompliant merchants would enforce the verification rules.
Small-Business Disruption Concerns
A large share of small QR-code merchants could lose access to UPI payment acceptance, creating possible disruption for their businesses.
Verification process
Regulatory Standardization
Having payment companies’ own employees conduct in-person KYC is intended to meet the RBI’s compliance requirements.
Small-Business Disruption Concerns
The rule has created operational difficulties and forced payment firms to expand their workforces.
Key facts
- Estimated offline merchants at risk
- Around 30-35% of small offline QR-code merchants could miss the deadline.
- Online businesses affected
- Nearly one million small online businesses may face verification challenges.
- Potential consequence
- Payment acceptance facilities could be suspended for merchants that fail to complete re-KYC.
- Expected overall completion
- Most payment aggregators expect to complete about 80% of merchant re-KYC by the deadline.
- Soundbox merchant outlook
- Around 85-90% of merchants using soundbox devices are expected to complete KYC.
- Verification requirement
- In-person KYC must be conducted by payment companies’ own employees rather than third-party agencies.
Sources
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