RBI Imposes Penalty on Cashfree Payments For PA–PG Norm Violations

The Reserve Bank of India (RBI) has announced a monetary penalty on Cashfree Payments India Private Limited for violations related to Payment Aggregator (PA) and Payment Gateway (PG) regulations. The order, dated March 09, 2026, cites specific non‑compliance with guidelines issued under the Payment and Settlement Systems Act, 2007.

The penalty of ₹3.10 lakh follows a statutory inspection and subsequent supervisory review of the company’s operations for the period from April 2024 to June 2025. RBI concluded that certain actions by the company, including an impermissible debit from its escrow account, breached prescribed norms.

RBI’s Regulatory Basis For The Penalty

RBI imposed the penalty under section 30(1) read with section 26(6) of the Payment and Settlement Systems Act, 2007. These provisions empower the central bank to act against regulated entities that fail to comply with operational or prudential requirements.

The PA–PG guidelines require strict adherence to rules around fund flows, customer protection and escrow management. In this case, the violation pertained to the usage of the escrow account beyond permissible limits.

Findings From the Supervisory Inspection

The statutory inspection of Cashfree covered the period from April 2024 to June 2025 and assessed compliance with RBI’s PA–PG guidelines along with operational integrity. Following the review, the central bank issued a notice indicating the possibility of a monetary penalty and sought a detailed response.

The findings included a confirmed instance of impermissible debit from the escrow account and deviations from prescribed norms for payment aggregators. The inspection also identified documentation inconsistencies and follow-up responses that failed to fully address the compliance gaps.

Response And Assessment by Cashfree Payments

Cashfree submitted a formal reply along with additional explanations in response to the RBI’s notice. The company attempted to clarify its operational processes and justify the relevant transactions.

However, after evaluating all submissions, RBI concluded that the charge of impermissible escrow account usage was sustained. This warranted the imposition of a ₹3.10 lakh monetary penalty.

Nature And Scope of RBI’s Action

RBI clarified that the action is strictly based on regulatory and statutory non‑compliance. It does not question the legitimacy of transactions undertaken by customers or contracts executed by the company.

The penalty also does not prevent future regulatory steps that RBI may take if required. This ensures that operational accountability is maintained without disrupting ongoing services.

Read More: RBI Reviewing Complaint Against Standard Chartered Bank Over Discounted Asset Sales.

Conclusion

The RBI’s decision to impose a ₹3.10 lakh penalty on Cashfree Payments underscores its oversight focus on the PA–PG ecosystem. The action stems from a confirmed deviation involving an escrow account transaction.

By issuing the order under the Payment and Settlement Systems Act, 2007, the regulator reinforces the importance of strict compliance for all payment intermediaries. The decision is confined to regulatory lapses and does not impact customer‑level operations or agreements.

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