The majority of SaaS startups rely on friction free recurring payments. An even larger number of companies have a subscription model; e.g. Spotify, Team Treehouse, Soylent, Birchbox, Makespace and Netfix. Then you have all the 'One Click Purchase' companies like Uber...
The list of companies you can screw over with unnecessary regulation is extraordinarily large.
I assume that's how PayPal got it, they certainly qualify for the $3 million criteria.
If they lower the bar, they will have to do it for everyone, and a lot of unscrupulous businesses will try to place recurring chargebacks. What's wrong with billing the client every payment cycle, or let them pay on longer durations, like quarterly? Refund extra money if someone discontinues earlier. Plenty of options, until 3 years of a financial history, then apply for a RBI clearance.
Credit card fraud is very common across the world, maybe the guidelines can be more clear and the clearance process made simpler, however I don't see why a startup should be allowed to place recurring charges on cards unless they have been a trustworthy business for a while.