Close on the heels of the guidelines of setting up payments banks, The Reserve Bank of India (RBI) has issued its final guidelines for the Bharat Bill Payment System (BBPS), a unified bill payment system for India. Both banks and non-banks which cater to payment services will be a part of the BBPS. The BBPS intends to offer an interoperable and accessible bill payment services to customers through a network of agents, enabling multiple payment modes, and providing instant confirmation of payment.
The National Payments Corporation of India has been authorized as the Bharat Bill Payment Central Unit (BBPCU) to implement the BBPS. Notes from the guidelines:
– Initially: a collection of repetitive (monthly, bi-monthly, quarterly etc.) payments for services provided by utility service providers.
– Gradually: the scope of BBPS could be extended to include services facilitating the collection of other types of repetitive payments, such as, school and university fees, municipal taxes and payments etc.
2. Structure of the system: The BBPS will function as a tiered structure, and consist of two types of entities carrying out distinct functions.
a. Bharat Bill Payment Central Unit (BBPCU) which will be the single authorized entity operating the BBPS, and set the operational, technical and business standards for the entire system and also undertake clearing and settlement activities. BBPCU should be “a Section 25 company under the Companies Act 1956 (amended to Section 8 of the Companies Act 2013), having professional senior management and experience in handling central infrastructure in payments, clearing and settlement, and transaction processing.” It will have to will put in place a dispute resolution mechanism to handle disputes arising between system participants, and ensure the setting up of a suitable fraud and risk management framework for the BBPS.
The National Payments Corporation of India will be authorized as the BBPCU to implement the BBPS.
(ii) Bharat Bill Payment Operating Units (BBPOUs), which will be the authorised operational units, working in adherence to the standards set by the BBPCU, and can create an agent network. There could be multiple BBPOUs operating under the BBPS.
Some key eligibility criteria for non-banking entities to operate as BBPOUS are-
- An Indian company, with the Memorandum of Association (MOA) which cover the proposed activity of operating as a BBPOU
- A net worth of at least Rs.100 crore as per the last audited balance sheet. This has has to be maintained at all times.
- 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.
- Entities that fall under the scope of BBPS but don’t meet the eligibility criteria will need to seek time not exceeding one year from the date of operationalization of BBPS to meet the eligibility criteria. Alternately, they may decide to partner with other eligible and authorized BBPOUs.
The BBPOU will be responsible for:
- On-boarding billers and aggregators
- Infrastructure development and application development, including APIs
- Transaction handling – Safety and security of transactions, verification of biller information.
- Handling customer grievances and disputes.
- Providing MIS and Reporting and other services to the billers / aggregators / agents.
3. Approvals required:
– The entity must seek authorization under the Payment and Settlement Systems Act, 2007 from the Reserve Bank of India for its operations. Existing non-bank entities, authorized under PSS Act 2007 to operate other payment systems, will have to obtain separate authorization for operating as a BBPOU under the BBPS. Banks which want to operate as BBPOUs will have to get an approval from the Reserve Bank of India under the Payment and Settlement Systems Act, 2007.
– Entities (both banks and non-banks) who receive in-principle approval will have to obtain necessary certification from BBPCU.
– In case of Foreign Direct Investment (FDI) in the applicant entity, approvals will be needed as per guidelines from the Department of Industrial Policy and Promotion (DIPP).
4. Types of transactions
There are two types of transactions on the BBPS:
– ON-US transactions, where the biller and payment collecting agent belong to the same BBPOU. For the ON-US transactions, the BBPCU will have no role in the clearing and settlement of the transactions and the same will be handled by respective BBPOUs, end-to-end, from collection of payment from customer by the agent, settling of funds between agent and BBPOU and final payment to the billers’ account.
– OFF-US transactions, where the biller and payment collecting agent belong to different BBPOUs. The BBPCU will handle all the OFF-US transactions reported by all BBPOUs and arrive at appropriate settlement for each biller across various BBPOUs. The BBPCU will arrange to instruct the settlement bank to make pay-outs to respective billers’ banks for credit to billers’ accounts.