NPCI issues guidelines for merchant acquisition on BHIM Aadhar Pay

The National Payments Corporation of India (NPCI), in a circular, has issued guidelines that put the onus of verifying merchant details on acquiring banks for BHIM Aadhaar Pay.  

“The obligation to acquire, manage, and monitor merchants for BHIM Aadhaar Pay rests with acquiring member banks. Acquiring member banks shall continue to be responsible for merchants onboarded by them directly or through aggregators/partners,” said NPCI in the circular.

BHIM Aadhaar Pay enables merchants to receive digital payments from customers over the counter through Aadhaar Authentication, according to the NPCI website. 

The NPCI issued these guidelines to an acquiring member bank’s key responsibilities and accountabilities when managing merchants.

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NPCI has been issuing advisories to curb the rising instances of frauds using the Aadhaar- enabled payment systems (AePS).

It has advised members to assign appropriate Merchant Category Code (MCC) while taking on board merchants. They are required to ensure that cash withdrawal transactions are not allowed on the BAP service’s merchants and banks have oversight on such merchants. 

The obligation to acquire, manage, and monitor merchants for BAP service rests with acquiring member banks. 

An acquiring member bank is required to monitor merchant activity such as on-boarding criteria, transaction monitoring and control, and training, among others. This acts as an oversight for merchant performance and due diligence. 

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Similarly, the guidelines state that the banks should ensure that there is a board-approved policy in place for merchant acquisition.  “A proper process on the merchant acquisition and portfolio monitoring along with the necessary due diligence should be in place to mitigate risks,” the circular said.

Other aspects such as merchant underwriting, merchant portfolio, and risk monitoring, and their training are adequately addressed by acquiring member banks. 

They are required to conduct reviews or audits of the third parties that are engaged by the merchants. 

Merchants associated with any acquiring bank live on BHIM Aadhaar Pay can accept payment from customers of any bank by authenticating their biometrics. 

Live member banks on the service include payments banks and small finance banks, cooperative banks, regional rural banks, and mainline commercial banks.