How to Accept Payments from Indian Customers as a Global Merchant
Summary
- Learn how global merchants can accept payments from Indian customers.
- Understand the RBI's Payment Aggregator – Cross Border (PA-CB) framework for compliant payment processing.
- Offer local payment methods such as UPI, RuPay, cards, and net banking in Indian Rupees (INR).
- Receive compliant cross-border settlements through an authorized payment partner.
- Explore the key compliance requirements and payment flow for international businesses.
Why India Should Be on Your Growth Radar
India's digital payment ecosystem is the fastest-growing in the world, driven by mobile-first architecture:
- Unified Payments Interface (UPI) Volume: UPI processes over 20 billion transactions every month, accounting for over 85% of all digital payments in India.
- Domestic Cards & Net Banking: India has nearly 1 billion active debit/credit cards (dominated by RuPay, Visa, and Mastercard) and 50+ net banking institutions.
- Massive Cross-Border Demand: Indian consumer and business adoption of foreign SaaS, cloud infrastructure, media, and e-commerce is at an all-time high.
The Problem: Why Direct International Card Payments Fail in India
When a non-resident merchant uses a standard foreign payment processor (such as a US-based Stripe or Adyen integration), card approval rates drop drastically. This is driven by two RBI regulatory mandates:
- Mandatory Additional Factor Authentication (AFA): RBI requires domestic card transactions to be authenticated using EMV 3-D Secure (3DS), generally through an OTP or banking app verification. Payment flows that do not support this authentication experience significantly lower authorization rates.
- Default Cross-Border Forex Blocks: Indian banks disable international/foreign currency transactions by default on most domestic debit and credit cards for security. If an Indian customer has not manually opted into international transactions, the checkout fails instantly.
Comparing Payment Acceptance Models for Foreign Merchants.
| Feature | Option 1: Local Indian Entity | Option 2: Payment Aggregator - Cross Border (PA-CB) |
|---|---|---|
| Setup Time | 3 – 6 Months | 1 – 2 Weeks |
| Local Entity Required? | Yes (Pvt Ltd / Subsidiary) | No (Operate as non-resident business) |
| Indian Bank Account Required? | Yes (Domestic INR Account) | No (Direct foreign account remittance) |
| Supported Payment Rails | UPI, Net Banking, Local Cards | UPI, Local Cards, Net Banking |
| Regulatory Framework | Domestic PA Guidelines | RBI PA-CB Directions |
| Per Transaction Limit | Unlimited | ₹25,000,000 (INR 25 Lakhs / ~$30,000) |
The Solution: The RBI PA-CB Framework
The Payment Aggregator – Cross Border (PA-CB) framework established by the RBI directly regulates entities facilitating cross-border current account transactions.
Under this setup, an RBI-authorized PA-CB entity acts as a compliant intermediary:
- For Indian Buyers: They check out in Indian Rupees (INR) using familiar local rails (Google Pay, PhonePe, Paytm, RuPay, Net Banking) complete with local OTP/PIN verification.
- For Global Merchants: The PA-CB collects INR locally, converts foreign exchange, logs compliance details under the Foreign Exchange Management Act (FEMA), and remits the funds to your home bank account in your preferred billing currency (USD, EUR, GBP, etc.).
Step-by-Step: How Money Flows
Step 1 - Checkout in INR:
The Indian customer selects products or services priced in INR and chooses a local payment option (UPI, RuPay, Net Banking).
Step 2 - AFA Verification:
The transaction is completed through RBI-compliant 2-Factor Authentication (UPI PIN or SMS OTP).
Step 3 - Outward Collection Account (OCA):
Funds are collected into the PA-CB's designated Outward Collection Account (OCA) maintained with an Authorised Dealer (AD Category-I) Bank before onward settlement overseas.
Step 4 - Forex Conversion & Purpose Code Tagging:
The PA-CB executes foreign currency conversion and tags the outflow with the appropriate RBI Purpose Code (e.g., P0802 for Software Exports/SaaS).
Step 5 - Overseas Payout & e-FIRA Generation:
The funds are settled to your overseas corporate bank account in accordance with RBI and FEMA reporting requirements.
Key Prerequisites & Common Pitfalls
Critical Transaction Limit: Under official RBI PA-CB rules, individual transactions processed via this channel are capped at ₹25,000,000 (INR 25 Lakhs / ~$30,000) per trade/service item. B2B enterprise transactions exceeding this limit must be processed via standard direct SWIFT wire transfers or traditional trade banking.
Merchant Due Diligence (KYB): Depending on your business model and the nature of goods or services supplied to Indian customers, GST registration and compliance obligations may apply. Merchants should consult their tax advisors before onboarding.
Correct Purpose Code Selection: Ensure your product or service type is mapped to the correct RBI Purpose Code during onboarding to avoid compliance delays or settlement holds.
Sources:
Reserve Bank of India (RBI) Master Directions on Payment Aggregators & PA-CB
National Payments Corporation of India (NPCI) - Monthly UPI Statistics
Foreign Exchange Management Act (FEMA) Guidelines - Reserve Bank of India
