RBI Approves PayPal as Payment Aggregator: What It Means for Indian Exporters

Introduction

On May 28, 2025, the Reserve Bank of India (RBI) granted in-principle approval to PayPal Payments Private Limited to operate as a Payment Aggregator for Cross-Border Exports (PA-CB-E). This landmark decision comes at a time when India’s exports have surged to $73.8 billion in April 2025, reflecting the nation’s growing stature as a global trade hub. By enabling PayPal to process and settle export transactions directly under a regulated framework, the RBI is paving the way for faster, more secure, and more cost-effective cross-border payments for Indian businesses.

This blog explores what the RBI’s nod means for Indian exporters, how it fits into the broader regulatory landscape, the potential benefits and challenges, and actionable steps exporters can take to capitalize on this development.

1. What Is a Payment Aggregator for Cross-Border Exports?

A Payment Aggregator (PA) is an entity authorized to facilitate payment collection and settlement on behalf of merchants. Unlike traditional payment gateways, which require each merchant to obtain individual authorization, a PA can onboard multiple merchants under a single regulatory umbrella.

• PA-CB-E: Specifically designated for cross-border export transactions, this role allows aggregators to collect foreign currency payments from overseas buyers and remit funds to Indian exporters.
• Scope: Under the Payment and Settlement Systems Act, 2007, PAs must adhere to stringent KYC, anti-money laundering (AML), and data security norms laid out by the RBI.

This framework reduces compliance overhead for small exporters, who can now integrate a PA rather than secure separate licenses or bank approvals for each transaction.

2. Details of PayPal’s Approval

According to PayPal’s official statement, the in-principle PA-CB-E approval enables PayPal to support export transactions to approximately 200 international markets. “As India grows into a global export hub, PayPal remains committed to empowering Indian businesses with trusted digital payment solutions,” said Nath Parameshwaran, Senior Director, Government Relations, PayPal India.

Key highlights of the approval:

• Regulated Framework: PayPal can now operate under a formal RBI license, ensuring enhanced transparency and customer protection.
• Product Integration: Localized offerings such as PayPal Checkout, PayPal Invoicing, and No-Code Checkout tools will be available to Indian exporters at scale.
• Risk Management: As a regulated PA, PayPal must maintain escrow accounts, adhere to settlement timelines, and undergo periodic audits—measures that enhance trust among exporters and their overseas clients.

3. India’s Export Momentum and Digital Payments

India’s merchandise exports crossed $73.8 billion in April 2025, up from $65 billion a year earlier, driven by sectors such as pharmaceuticals, engineering goods, and textiles. Streamlined payment processes are becoming increasingly critical as exporters compete on both price and service quality.

Why digital payment efficiency matters:

• Reduced Transaction Costs: Conventional cross-border transfers often involve multiple intermediaries and high foreign exchange margins. Payment aggregators can negotiate bulk FX rates and reduce per-transaction fees.
• Faster Settlements: Exporters need quicker access to funds for working capital. Aggregators typically settle in 24–48 hours, compared to 3–5 days via traditional bank channels.
• Enhanced Visibility: Real-time dashboards for tracking payments help businesses manage cash flows and reconcile accounts more efficiently.

4. Benefits for Small and Medium Enterprises (SMEs)

SMEs account for over 40% of India’s exports, yet many struggle with payment delays and complex remittance processes. The RBI’s approval of PayPal as a PA-CB-E can level the playing field:

1. Simplified Onboarding
   Instead of securing a Payment Gateway license, SMEs can sign up with PayPal, complete KYC once, and begin accepting payments immediately.
2. Multiple Currency Support
   Exporters can invoice in US dollars, euros, pounds, and other major currencies, eliminating the need for multiple foreign currency accounts.
3. Risk Mitigation
   PayPal’s dispute resolution mechanisms and buyer/seller protection policies reduce the likelihood of payment fraud—an especially important feature for new exporters.

By integrating PayPal’s solutions, SMEs can focus resources on production and marketing, rather than navigating complex banking processes.

5. Regulatory Evolution and the Road to PA-CB-E Approval

In October 2024, RBI mandated that all non-bank entities offering cross-border payment services obtain separate PA-CB approvals. Prior to this, most payment companies operated under the Online Payment Gateway Service Provider (OPGSP) license for nearly a decade.

This regulatory shift was designed to:

• Enhance Oversight: By creating distinct categories for domestic and cross-border PAs, RBI can tailor guidelines to the specific risk profiles of export transactions.
• Promote Innovation: Clear licensing pathways encourage fintech firms to develop niche solutions—such as localized checkout experiences and embedded finance tools—without falling into compliance grey areas.
• Safeguard Foreign Exchange Reserves: Aggregators must adhere to strict repatriation norms, ensuring timely conversion of foreign currency inflows.

6. How Exporters Can Leverage PayPal’s PA-CB-E Services

To make the most of PayPal’s new PA-CB-E capabilities, exporters should consider the following steps:

1. Assess Technology Readiness
   Ensure your website or e-commerce platform supports PayPal’s APIs. For non-tech firms, PayPal’s No-Code Checkout plugins can be integrated within hours.
2. Update Pricing Strategies
   Factor in competitive FX rates and reduced transaction fees to potentially offer better pricing to international buyers.
3. Train Sales and Finance Teams
   Familiarize staff with PayPal’s dashboard for monitoring payments, issuing refunds, and handling disputes.
4. Expand to New Markets
   With support for 200 markets, exporters can test demand in regions previously avoided due to payment complexities—such as South America or Southeast Asia.
5. Monitor Compliance
   Stay informed about RBI reporting requirements, including quarterly disclosures and transaction limit thresholds, to avoid regulatory penalties.

7. Potential Challenges and Considerations

While the approval is a positive step, exporters should be aware of certain considerations:

• Fee Structures: Payment aggregators typically charge a percentage fee per transaction. Exporters must compare these costs against traditional bank charges based on volumes.
• Settlement Timings: Although faster than banks, PAs may impose a rolling reserve or holdback on first few settlements to manage risk.
• Technical Integration: Legacy ERP or billing systems might require middleware or custom development to connect with PayPal’s APIs.
• Regulatory Updates: RBI guidelines evolve; exporters should maintain lines of communication with their PA to adapt to new compliance norms swiftly.

By proactively addressing these areas, businesses can minimize disruptions and maximize the benefits of the new PA framework.

8. The Future of Cross-Border Payments in India

The RBI’s move to license specialized cross-border payment aggregators reflects a broader trend:

• Digital Rupee Integration: As India pilots its central bank digital currency (CBDC), future PAs may offer settlement in digital rupees, further reducing costs.
• Embedded Finance: Export platforms could embed payment aggregation directly into order management systems, creating end-to-end digital export solutions.
• AI-Driven Risk Management: Machine learning models will flag suspicious transactions in real time, enhancing security without manual overhead.

As these innovations converge, India’s exporters will benefit from a more agile and competitive financial infrastructure.

Conclusion

The RBI’s in-principle approval of PayPal as a Payment Aggregator for Cross-Border Exports marks a significant milestone in India’s fintech and trade landscape. By streamlining compliance, reducing costs, and accelerating settlement cycles, this development empowers exporters—especially SMEs and freelancers—to expand their global footprint with confidence. However, businesses must remain vigilant about fee structures, integration challenges, and evolving regulations. With the right preparation and a trusted partner like PayPal, Indian exporters can leverage these regulatory changes to unlock new markets, optimize cash flows, and thrive in the competitive world of global commerce.