PA Settlement Rules: When Merchants Get Paid

Merchants often ask: “When will I receive the money I collected via a payment aggregator?” With the 2025 PA regulations, the answer is clearer—read on for timing, escrow rules, and merchant safeguards.

What Settlement Means in the PA-Merchant Chain

When a customer pays a merchant via a payment aggregator (PA), the money flows through the payments chain before reaching the merchant’s account. Settlement refers to the final credit of funds to the merchant. In other words: you collected money → PA holds/in-escrow temporarily → you get credited. Pa Merchant Settlement Timeline

Because PAs handle large volumes of transactions, there are multiple regulated steps: collection, verification, transfer between escrow accounts, and merchant payout. The National Payments Corporation of India (NPCI) and RBI have set norms to ensure that merchants do not wait indefinitely for funds.

Insight: Settlement delay doesn’t just cost time — it adds working-capital pressure on merchants.

RBI’s T+1 & Escrow Rules for PAs in 2025

In its Reserve Bank of India (Regulation of Payment Aggregators) Directions, 2025, the RBI mandates that payment aggregators maintain escrow (“core portion”) accounts and follow settlement timelines. Rbi Pa Escrow Rules

Key settlement rules for merchants:

The core portion of the escrow account must be used for merchant settlements and cannot be lent out or used for the PA’s own operations.
PAs must credit merchant funds no later than T+1 banking day (T = date of sale/transaction).
PAs are prohibited from using merchant funds for their own working capital until settlement is done.
Merchant discount rate (MDR) and other charges must be clearly disclosed and contractually agreed to, so net payout to merchant is transparent.

For merchants, the “T+1” rule means if a transaction happens on Monday (T), the money should reach your bank account by Tuesday (T+1) at the latest — subject to bank working hours and reconciliation.

Tip: If your PA still shows “pending for settlement” after T+1, ask for the contractual payout schedule and escrow certification.

What Merchants Should Track Before Payment Hits Their Account

To ensure you receive settlement smoothly, monitor the following items under Merchant Due Diligence Pa:

Contractual payout frequency: Is it daily, weekly or batch-settlement? T+1 is max allowed, but your contract may specify daily settlements.
Escrow account status: Ask your PA the bank & account where merchant funds are held; this builds trust.
Net payout after MDR and fees: Ensure MDR and platform fees are deducted transparently each payout.
Reconciliation report: Regular reports showing transactions settled, withheld (if any), and pending payouts.
Return/refund impact: If a refund or chargeback is lodged, settlement may be reversed — track refund and dispute terms.

Delays often happen due to merchant KYC issues, disputed transactions, or incomplete reconciliation. Keep those cleared proactively.

Insight: A small merchant waiting 2-3 days for settlement always feels worse than large players — transparency matters more than speed.

Practical Tips for Merchants to Ensure Faster Settlement

Here are actionable steps to avoid settlement hiccups — following Merchant Payment Risk Checklist:

Keep KYC complete and updated: Ensure your business registration, address proof and bank details are valid — delays often happen from missing info.
Choose a PA with clear settlement terms: Evaluate payout experience, escrow status and settler bank reliability.
Monitor your daily deposits: Compare what shows up in your account vs what the PA reports — mismatch means hold-up.
Track refund/chargeback window: If customer returns goods, funds might be withheld. Have a policy in place.
Negotiate settlement speed and batch times: Some PAs settle late evening or next morning; explore same-day cut-off if your business needs it.

For small merchants in Tier-2 or Tier-3 cities, smoother payout means you can reinvest sooner, buy stock and keep cash-flow healthy. The RBI’s new rules are designed to protect you — but you must still pick reliable partners.

Tip: Settlement speed is a differentiator — don’t let it become an after-thought.

With clearer regulatory backing from RBI, you now have better rights as a merchant. Know your payout timeline, ask for transparency, and ensure your PA treats your revenue like your business cash-flow — not just a ledger entry.

Frequently Asked Questions

1. By when must a payment aggregator settle funds to a merchant?

A PA must credit merchant funds no later than T+1 banking day after the transaction date.

2. Can a PA hold funds for multiple days without payout?

No — the escrow rules require that merchant collections are settled promptly and cannot be used by PAs for their own operations. Long hold-ups must have valid contract reasons.

3. Are merchant discount rates (MDR) required to be disclosed?

Yes — the PA must clearly disclose MDR, fees, settlement terms and any deductions in the contract with the merchant.

4. What happens if there is a refund or chargeback?

Refunds or chargebacks can delay or reverse settlement. Merchants should monitor refund windows and keep liquidity for possible reversals.

5. How can I check if my PA holds funds in escrow properly?

You can ask for the PA’s escrow account bank/branch details, request proof of core portion segregation, and review your monthly reconciliation statements. Transparency is your right under the regulatory framework.