Bharat Bill Payment System (BBPS): RBI direction 2024

In Supersession of earlier BBPS-related guidelines/circulars,  RBI on Friday (March 1, 2024) issued the new Directions hereinafter specified. These Directions shall be applicable from April 01, 2024.

The provisions of the new Directions shall apply to NPCI Bharat Bill Pay Limited (NBBL) a wholly owned subsidiary of the National Payments Corporation of India); and All Bharat Bill Payment Operating Units (BBPOUs). Both of them are participants in the Bharat Bill Payment System (BBPS).

Bharat Bill Pay Central Unit (BBPCU)is the entity that operates BBPS; sets operational, technical, and business standards, and also undertakes clearing and settlement functions. BBPCU ensures that all transactions have BBPS reference number from the payment initiation stage and also ensures that no funds in the system flow through any TSP; and provides a framework for redressal of consumer disputes.NPCI Bharat BillPay Ltd. (NBBL) is the authorized BBPCU.

BBPOUs are the System Participants in BBPS. A BBPOU may function either as a Biller Operating Unit or a Customer Operating Unit or both.

The Biller Operating Unit (BOU) is an entity that onboards biller(s), either directly or through biller aggregator(s), onto the BBPS platform for the collection of its bills.  It ensures compliance with due diligence requirements in respect of the onboarding of merchants prescribed in Guidelines on Regulation of Payment Aggregators and Payment Gateways dated March 17, 2020, as updated from time to time. It also ensures compliance with additional due diligence requirements which may be prescribed by NBBL for specific biller categories; and Ensures due diligence of the billers onboarded through biller aggregators.

Escrow Account Operations

(i). A non-bank BBPOU shall open an escrow account with a Scheduled Commercial Bank exclusively for BBPS transactions.

(ii) Non-bank BBPOU operates as a Payment Aggregator (PA) when it collects funds from its customers or settles funds with the billers onboarded by it. For maintenance of the escrow account, payment system operated by BBPOU shall be deemed to be a ‘designated payment system’ under Section 23A of the PSS Act, 2007 (as amended from time to time).

A customer Operating Unit (COU) is an entity that provides its customers with an interface (physical/digital) to pay bills, either directly or through agent institution(s). It ensures customers (including customers of their agent institutions) have access to all billers onboarded on BBPS. It also provides a system for raising disputes; and taking responsibility for the activities of its agent institutions, for which they have agreed with the COU.

Eligible credits and debits in the escrow account of a COU are as follows:

(a) The credit of funds collected from the customers

(b) Debit towards the settlement of BBPS transactions

(c) Credit/debit of failed/disputed transactions

(d) Recovery of charges/commissions about bill payment transactions

Eligible credits and debits in the escrow account of a BOU are as follows:

(a) Debit of funds due to the billers

(b) Credit towards the settlement of BBPS transactions

(c) Credit/debit of failed/disputed transactions

(d) Recovery of charges/commissions about bill payment transactions

All other instructions applicable on escrow accounts as provided in Guidelines on Regulation of Payment Aggregators and Payment Gateways dated March 17, 2020 (as updated from time to time) shall be applicable for BBPS Escrow Account.

Other terms used in BBPS:
Biller: An entity (including Central and State Government Department / Public Sector Undertaking/individuals) that is connected to BBPS through a BOU (either directly or through a biller aggregator) for the collection of bill payments.

Biller Aggregator: An entity that aggregates billers to enable them to connect to a BOU.

Sponsor bank: A Scheduled Commercial Bank that facilitates settlement of non-bank BBPOUs with NBBL.

Technology Service Providers (TSP): Entities certified by NBBL to provide technology services and solutions to billers / BBPOUs / Agent Institutions to integrate with BBPS.

Agent Institution: An entity, certified by NBBL, which provides customer interface (physical/digital) for bill payments.

Besides digitizing cash-based bill payments, these segments would also benefit from the standardised bill payment experience for customers, centralised customer grievance redressal mechanism, prescribed customer convenience fee, and the like. Detailed instructions in this regard will be issued by the end of September 2019.

FAQs on BBPS:

Why is an exclusive payment system like BBPS needed in India?

The bill payment system in India has grown enormously over the years. The bill payments arise out of trade and service transactions including utility bills, taxes, school and college fees, etc. In our country, at present these payments are predominantly made through cash and cheques. Although payment through electronic mode exists in India they do not fully address the needs of the majority of the population due to a lack of accessibility across the country. To address this issue, the idea of establishing a pan-India touchpoint payment system was crept up. The Reserve Bank of India had initiated the groundwork for the creation of BBPS under a wide consultative process of study groups, stakeholders, and the general public.

What are the functions of the Bharat Bill Payment System?

The planned ‘Bharat Bill Payment System (BBPS)’ is a government of India undertaking that will be accountable for setting the new standards for the bill payment system in India. BBPS is an integrated bill payment platform that enables payment/collection of bills through multiple channels (Mobile Apps, Mobile Banking, Physical Agents, Bank branches, etc.) using various payment modes (UPI, Internet Banking, Cards, Cash, Prepaid Payment Instruments, etc.). The transactions facilitated through this platform will require the bill to be fetched before payment initiation. In the case of transactions involving payments for prepaid services, the customer relationship with the biller will be validated through the platform. The entity will be operating as a centralized inter-operable bill payments system. With the advent of the latest technologies, BBPS adores multifold payment modes. The system enables the delivery of instant confirmation of payments to the customers, thereby enhancing the consumer’s confidence and experience in it.

How the BBPS is structured?

BBPC will be a tiered structure made up of two separate units. The first type of unit is called Bharat Bill Payment- central unit (BBPCU) and the second type is called Bharat Bill Payment-operating units (BBPOUs). The agents of BBPOUs, payment gateways, banks, billers, and other service providers like issuers of prepaid instruments are the participants in BBPS. The settlement standards established in BBPS with the approval of the Reserve Bank should be adhered to by all the participants.

What are the roles of BBPCU in BBPS?

BBPCU will be the sole entity to operate the BBPS. It will set the business standard for the entire system and its participants. Furthermore, it will be responsible for necessary operational, and technical services besides undertaking clearing and settlement activities. The settlement standards established under the BBPCU, with the approval of RBI, have to be adhered to by all the BBPS participants

The National Payments Corporation of India (NPCI), a government of India undertaking is authorized to act as BBPCU. NPCI is the umbrella institution for all retail payment systems in the country.

What is the role of BBPOUs in BBPS?

BBPOUs are the multiple authorized units operating under BBPCU.  The banks and other entities that have experience in the field of bill collection/services and relevant experience in transaction processing are authorized to act as BBPOU. The BBPOUs may further fortify their activities by employing effective agent networks.

The banks and non-banking entities, that wish to become BBPOU, need to obtain approval from the Reserve Bank of India under the Payment and Settlement Act 2007.

How does the process of final settlement of pay-out take place in BBPS?

The bill payment system broadly consists of content providers (Billers) on the one hand and payment aggregators on the other.

The billers can be classified into two groups for settlements.

1. The biller and payment collecting agent belong to the same BBPOU. (ON-US transactions)
2. The biller and payment collecting agent belong to different BBPOUs.(OFF-US transactions)

Under the BBPS settlement system, BBPOUs would receive payment collection proceeds through the clearing and settlement process carried out by them and their agents.  In the aggregate collection of ON-US transactions received concerning its various billers, the concerned BBPOU will directly arrange final payment to the credit of the respective billers’ bank accounts.

In case of collections of OFF-US transactions, BBPOUs will pay or receive the net amount as arrived at by the BBPCU based on a report received by it by various BBPOUs. The BBPOUs on the conclusion of the final settlement from BBPCU concerning their billers will arrange the fund’s transfer to the biller’s bank account.

BBPCU will be responsible for setting standards for payment, clearing, and settlement of the transactions carried out at various BBPOUs and their agents for both ON-US and OFF-US transactions.

Related Post: