PhonePe, Paytm, Cred end rent service as RBI tightens payment rules

PhonePe, Paytm, Cred end rent service: Regulator's new rules require payment aggregators to route funds only to registered merchants, impacting rent payments via credit cards

Fintech giants PhonePe, Paytm and Cred have discontinued rent payment services after the Reserve Bank of India (RBI) changed the way Payment Aggregators (PAs) operate.

 

“A PA shall aggregate funds only for the merchant with whom it has a contractual relationship. PA business shall not carry out marketplace business,” the RBI said in Master Direction regulations issued on Monday.

 

Fintechs can no longer route payments to landlords not registered as merchants with full KYC. The rule aims to ensure stronger diligence and prevent misuse of credit cards for peer-to-peer transfers disguised as merchant payments.

 

Rent payments via credit cards had become one of the fastest-growing categories for fintechs. Users leveraged these services to:

 

 

• Earn cashback or reward points 
• Manage cash flow by converting rent into EMIs

 

But under the new framework, funds can only be settled to onboarded merchants’ bank accounts after due diligence. This effectively shuts the door on landlords who are not part of the formal merchant ecosystem. 

 

Expert view: a landmark step

 

Industry observers say the move is more than just a compliance clampdown, it reshapes the payment landscape.

 

“The RBI’s new Master Direction on Payment Aggregators is a watershed in regulatory approach,” said Parimal Kumar Shivendu, group head at Easebuzz and a former AGM at RBI,

 

“It reduces regulatory clutter by moving to a single PA licence with intimation-based business expansion, eases compliance by shifting to a principle-based framework instead of micro-rules, and builds accountability by making PAs directly responsible for merchant due diligence rather than acquiring banks,” he said. 

 

For now, users will no longer be able to route their monthly rent through these apps. Instead, they will need to switch back to bank transfers, UPI, or cheques.

 

Fintechs may reintroduce the service in future, but only after implementing stricter KYC and onboarding landlords as merchants, a process that could take time and might not be attractive for casual landlords.

 

The latest move is part of RBI’s broader push to tighten compliance in digital payments. By explicitly barring marketplace-style rent payments, the regulator aims to minimise fraud risks and strengthen oversight of payment flows.

 

For fintechs, the change means losing a high-volume use case that boosted card spends and convenience fee income. For users, it ends an easy way to earn credit card rewards on rent.