The Reserve Bank of India has ordered Cashfree Payments and Razorpay to stop on-boarding new merchants until they receive their payment aggregator license, which so far they have only received an in-principle approval for, Entrackr has learnt. The central bank told the companies to hand in their security audit report before it licenses them. Razorpay’s receipt of this advisory was first reported by Moneycontrol.
Stripe, the California-headquartered payments firm, has been told to set up an escrow account within India.
“As part of the process for the final authorisation of our PA/PG license for which we received the in-principle approval from RBI in July, we are now required to share additional details with RBI to aid in the final license process,” Razorpay said in a statement. “As part of this process, RBI has suggested us to temporarily withhold onboarding new online merchants till such details are submitted. As a responsible corporate that operates under the ambit of RBI, Razorpay has abided by the regulatory requirement.” The company’s existing merchant base won’t be impacted, the statement added.
“We haven’t received any communications from the RBI asking us to pause onboarding,” Stripe said in a statement. “We look forward to continuing to operate in India and help Indian businesses process their payments, support their subscription business models, and combat fraud.”
On Wednesday, RBI Governor Shaktikanta Das and senior RBI officials met with representatives from the fintech industry, and cautioned them to “pay close attention to governance, business conduct, data protection, customer centricity, regulatory compliance and risk mitigation frameworks,” according to a readout of the interaction.
It’s unclear why the RBI has gone so far as to prohibit on-boarding new merchants, especially when it has reportedly granted in-principle approval for all three entities. We have reached out to the central bank for comment.
Several applications for a PA license have been rejected by the central bank as the RBI prioritises firms whose primary focus is payments. MobiKwik-owned Zaakpay’s application was rejected earlier this year because it had an inadequate net worth, violating RBI’s guidelines.
Paytm had to reapply for a PA license after its previous application was returned by the RBI. Firms like Swiggy, Zomato and Google have not been successful in obtaining a PA license, potentially forcing them to rely on licensed payment gateway operators to serve as an intermediary for transactions on their platforms.
Update (17:56): Stripe clarified that they have not been asked to pause on boarding of new merchants. This story has been updated with their statement.
Disclosure: Entrackr has an advertising agreement with Cashfree Payments.