Bharat Bill Payment Systems: RBI’s New Directions and Operational Framework

Posted On - 2 April, 2024 • By - Vivek Jain

The bill payment system in India has witnessed substantial growth over the years, predominantly reliant on cash and cheques. However, electronic payment modes have not fully addressed accessibility concerns across the country. To remedy this, the establishment of a PAN-India touchpoint payment system, Bharat Bill Payment Systems i.e. BBPS, was initiated by the Reserve Bank of India, following extensive consultation with study groups, stakeholders, and the public. BBPS, a government undertaking, sets standards for the Indian bill payment system, offering an integrated platform for bill payment/collection through multiple channels and payment modes. It mandates bill retrieval before payment initiation and ensures validation of customer relationships with billers for prepaid services. Operated as a centralized inter-operable system, BBPS provides instant payment confirmations, enhancing consumer experience. In compliance with its statutory authority conferred under Section 18 of the Payment and Settlement Systems Act, 2007 (PSS Act), the Reserve Bank of India (RBI) has issued the Reserve Bank of India (Bharat Bill Payment System) Directions, 2024. These Directions, effective from 1st April 2024, are aimed at regulating and streamlining the operations of the Bharat Bill Payment System (BBPS), a significant initiative in the realm of digital payments in India.

These provisions clarify the applicability timeline for the subsequent regulatory framework:

  1. These Directions shall apply to NPCI Bharat Bill Pay Limited (NBBL), a wholly owned subsidiary of the National Payments Corporation of India (NPCI), and all Bharat Bill Payment Operating Units (BBPOUs). By extending the regulatory ambit to these entities, the RBI seeks to ensure uniform standards and compliance across the BBPS ecosystem.
  2. NBBL is expressly designated as the Payment System Provider for BBPS, highlighting its pivotal role in overseeing the system’s operations. Additionally, entities operating payment systems outside the BBPS framework are subject to authorisation under the PSS Act, reinforcing regulatory oversight.
  3. The Directions elucidate various key terms essential for interpreting the regulatory framework. These include Agent Institution, BBPCU, BBPOUs, Biller Operating Unit (BOU), Customer Operating Unit (COU), Biller, Biller Aggregator, Sponsor Bank, and Technology Service Providers (TSPs). Clarity in definitions ensures consistent interpretation and implementation of regulatory provisions.
  4. The Directions delineate the roles and responsibilities of participants within the BBPS ecosystem. NBBL, as the BBPCU, is entrusted with setting operational standards, facilitating settlements, and ensuring transaction integrity. BBPOUs, comprising banks and non-bank entities, play a crucial role in bill collection and system operations.
  5. The establishment of escrow accounts by non-bank BBPOUs underscores the importance of financial safeguards in BBPS transactions. Furthermore, delineating eligible credits and debits in COU and BOU escrow accounts ensures transparency and accountability in fund management. A non-bank BBPOU is mandated to establish an escrow account with a Scheduled Commercial Bank, exclusively for BBPS transactions. A non-bank BBPOU, when collecting funds from customers or settling funds with onboarded billers, operates as a Payment Aggregator (PA). The payment system operated by BBPOU, for escrow account maintenance, shall be deemed a ‘designated payment system’ under Section 23A of the PSS Act, 2007, as amended.
  6. Provisions for centralized dispute resolution mechanisms and adherence to RBI guidelines on Online Dispute Resolution (ODR) underscore the RBI’s commitment to consumer protection. Integration of COUs and BOUs into the dispute resolution framework ensures swift resolution of customer grievances.

The Reserve Bank of India (Bharat Bill Payment System) Directions, 2024, represent a significant regulatory intervention aimed at fostering transparency, efficiency, and consumer protection within the BBPS ecosystem. By establishing clear guidelines for participant roles, operational standards, and dispute resolution mechanisms, the RBI seeks to promote the adoption of digital payments while safeguarding the interests of stakeholders. As the BBPS continues to evolve, adherence to these Directions will be instrumental in ensuring the integrity and stability of India’s burgeoning digital payment landscape.