Why 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 and school college fees etc. In our country, at present these payments are predominantly made through cash and cheques. Albeit, payment through electronic mode exist in India they do not fully address the needs of majority of population due to lack of their accessibility across the country. In order to address this issue, the idea of establishing a pan-India touch point payment system was crept up. The Reserve Bank of India had initiated the groundwork for creation of BBPS under wide consultative process of study groups, stake holders and the general public.
What are the functions of Bharat Bill Payment System?
The planned ‘Bharat Bill Payment System (BBPS)’ is a government of India undertaking which will be accountable for setting the new standards for bill payment system in India. The entity will be operating as a centralized inter-operable bill payments system. With the advent of latest technologies, BBPS adores multifold payment modes. The system enables delivery of instant confirmation of payments to the customers, thereby enhances the consumer’s confidence and experience in it. Thus, the set up of Bharat Bill Payment System is slated to be an efficient, cost effective alternative to the existing bill payment system in India. The proposed BBPS is also expected to provide an accessible bill payments system to the large segments of un-banked / under-banked population spread all over the country.
How the BBPS is structured?
BBPC will be the tiered structure made up of two separate units. First type of unit is called Bharat Bill Payment- central unit (BBPCU) and 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 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 business standard for the entire system and its participants. Furthermore it will be responsible for necessary operational, 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 system 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, who wish to become BBPOU, need to obtain approval from Reserve Bank of India under the Payment and Settlement Act 2007.
How the process of final settlement of pay-out takes 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 in two groups for the purpose of settlements.
- The biller and payment collecting agent belongs to same BBPOU. (ON-US transactions)
- The biller and payment collecting agent belongs to different BBPOUs.(OFF-US transactions)
Under BBPS settlement system, BBPOUs would receive payment collection proceeds through clearing and settlement process carried out by them and their agents. The aggregate collection of ON-US transactions received in relation to its various billers, the concerned BBPOU will directly arranges final payment to the credit of respective billers’ bank account.
In case of collections of OFF-US transactions, BBPOUs will pay or receive the net amount as arrived at by the BBPCU on the basis of report received by it by various BBPOUs. The BBPOUs on conclusion of final settlement from BBPCU in relation to their billers, will arrange the funds transfer to biller’s bank account.
BBPCU will be responsible for setting standards in relation to payment, clearing and settlement of the transactions carried out at various BBPOUs and their agents for both ON-US and OFF-US transactions.