In September 2019, the Reserve Bank of India (“RBI”) announced that it will bring all repetitive bill payments, except prepaid recharges under the ambit of the Bharat Bill Payment System (“BBPS”) and issued a notification to this effect (“Notification”). Prior to this, the system catered to only five services – DTH, water, electricity, gas, and telecom. RBI’s move enables the use of BBPS for any recurring payments such as insurance premiums, mutual fund contributions, municipal taxes, and even school and university fees.
The Bharat Bill Payment System is an integrated bill payment system, introduced by the National Payment Corporation of India (“NPCI”) and the RBI as an initiative to promote financial inclusion and digital payments. It was part of the larger campaign of ‘Digital India’ introduced by the government to improve access to technology and encourage e-governance. BBPS offers interoperable bill payment service to customers online as well as through a network of agents on the ground.
II. Structure and eligibility criteria
The Guidelines mandate that the BBPS will function as a tiered structure consisting of two types of entities:
- Bharat Bill Payment Central Unit (“BBPCU”) – single authorised entity operating the BBPS. The BBPCU sets necessary operational, technical and business standards for the entire system and its participants, and also undertakes clearing and settlement activities.
- Bharat Bill Payment Operating Units (“BBPOU”) – authorised operational units working on the basis of the standards set by the BBPCU.
BBPOUs are further divided into:
- Customer Operating Unit – BBPOUs engaging only with customers;
- Biller Operating Unit – BBPOUs engaging only with billers; and
- Both (Customer OU and Biller OU) – BBPOUs managing both customers and billers.
The tiered structure consists of an agent network(s) of the BBPOUs. While there is a single BBPCU, there are multiple BBPOUs operating under the BBPS. The participants in the BBPS include authorised entities, such as the BBPCU, the BBPOUs as well as their agents, payment gateways, banks, billers, service providers, and other entities, including authorised prepaid payment instrument issuers. The Guidelines stipulate that banks and non-bank entities that are desirous of operating as BBPOUs would need to obtain approval from the RBI under the Payment and Settlement Systems Act, 2007.
The eligibility criteria for non-bank entities seeking to operate as BBPOUs is as follows:
- The entity should be a company incorporated and registered in India.
- The memorandum of association of the entity must cover the proposed activity of operating as a BBPOU.
- The entity should have a net worth of at least INR 100,00,00,000 (Hundred Crores) as per the last audited balance sheet and the same has to be maintained at all times.
- In case of any foreign direct investment (“FDI”) in the entity, necessary approval from the competent authority as required under the policy notified by the Department of Industrial Policy and Promotion (DIPP) under the consolidated policy on FDI and regulations framed under the Foreign Exchange Management Act, 1999 (FEMA) must be submitted while seeking authorisation.
- The entity must have a domain experience in the field of bill collection/services to the billers, and relevant experience in transaction processing for a minimum period of one year.
III. Roles and responsibilities
The BBPCU is responsible for:
- setting standards – (i) business standards, rules, and processes for on-boarding the BBPOUs authorised under the Payment and Settlement Systems Act; including multiple billers and BBPOUs relationship (ii) processes and procedures for various business, technical, operational requirements both at the BBPCU and the BBPOUs level, including setting up of agent network, (iii) Information exchange standards, including security standards; and (iv) risk mitigation;
- marketing and brand positioning of the pan-India BBPS;
- oversight and certification for the conduct of operations of the BBPOUs;
- setting standards in relation to payment, clearing, and settlement of the transactions carried out at various BBPOUs and their agents;
- putting in place a dispute resolution mechanism to handle disputes arising between system participants; and
- putting in place an appropriate MIS system.
The BBPOUs are responsible for:
- on-boarding of billers and aggregators as per standards, the appointment of agents; carrying out due diligence and ensuring that confidentiality and privacy standards are in place;
- application development, including APIs where required, by respective BBPOUs to ensure compliance standards set by the BBPCU;
- safety and security of transactions, verification of biller information, adherence to transaction flow standards set by the BBPCU;
- handling customer grievances and disputes as per set procedures and standards for billers, agents or end-customers; and
- providing value-added services such as MIS and reporting and other services to the billers, aggregators or agents.
The BBPCU and the BBPOU are also required to set up efficient customer protection and grievance redressal system based on the Guidelines.
The Bharat Bill Payment System is a step towards making India a cashless economy. The RBI has granted licenses to thirty-nine banks to operate as BBPOUs including Axis Bank, ICICI Bank, Kotak Mahindra Bank, and HDFC bank and nine non-bank entities including Avenues India Private Limited and CSC e-governance Services India Limited.
- Guidelines refer to the Notification and the guidelines issued by the RBI in November 2014.
- Agents are customer touch-points and service points which will be available in the form of branch offices, collection centers, and outlets. Agents will accept bill payments through various modes. Agents may be on-boarded either directly by BBPOU or by agent institutions. Agent institutions are entities other than BBPOUs who currently offer or wish to offer bill payment service to its customers through physical or digital channels. All the entities, who have not received in-principle authorisation from RBI to act as a BBPOU or who have not applied may be eligible to become an agent institution under the BBPS scheme.
- Billers are the service provider who collects payments from customers/ consumers and will participate in the BBPS through BBPOU.
- Refer to sections 4-7 of the Payment and Settlement Systems Act, 2007.
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