Unraveling RBI’s BBPS Revolution: Analysis of Regulatory Impact

25th May, 2024 - 6:15 am Categories: Banking News & Updates RBI 0 Comments

Introduction

The Reserve Bank of India released the Master Direction for the regulation of the Bharat Bill Payment System on February 29, 2024, under the title Reserve Bank of India (Bharat Bill Payment System) Directions, 2024. The RBI’s earlier Implementation of Bharat Bill Payment System (BBPS) – Guidelines will be replaced by the Directions in an attempt to enhance consumer protection and participation by streamlining the method used by the payment system to pay bills

BBPS is a specialized payment system created especially for recurring bill payments across range of utility services. It is opertaed by National Payments Corporation of India (“NPCI”).

Key Features of the Regulation

In addition to running the payment system and establishing industry standards, NBBL is the approved Bharat Bill Pay Central Unit (or “BBPCU”) that handles clearing and settlement duties. In contrast, BBPOUs are BBPS system participants that can operate as BOUs (Biller Operating Units) or COUs (Customer Operating Units), or both. While a COU offers clients a physical or digital interface via which they can access billers in the payment system, a BOU onboards billers to BBPS. BOUs need to make sure that merchants follow rules set by the RBI or NBBL. COUs must have a way for customers to complain and access their bills. Also, COUs are accountable for the actions of agent institutions they hire to help customers with payments. NBBL must set up a centralized system for solving disputes, following RBI guidelines. This system will bring together all COUs and BOUs involved, so customers and billers can handle disputes efficiently. Additionally, the regulations governing the admission of non-bank payment aggregators, or “PAs,” into the BBPS framework have been loosened. A non-bank PA no longer needs additional licensing in order to operate in the BBPS framework after they are approved to do so under the Payment and Settlement Systems Act, 2007 or by an in-principle authorization. Nonetheless, non-bank PAs are additionally required to keep escrow accounts with Scheduled Commercial Banks solely for the purpose of conducting BBPS transactions.

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Analysis

An already highly regulated payment system has been subject to additional regulations as a result of the RBI’s recent regulatory obligations, which were implemented through the Master Directions. Although some guidance on BBPS interoperability was given in the previous recommendations, the new guidelines simplify and combine current RBI laws inside the BBPS framework in an effort to improve clarity.

The Directions, in contrast to earlier recommendations, have simplified the consumer grievance and settlement process by combining BBPOU and BBPCU into an all-inclusive complaint management system. But there is a significant distinction in the standards for BBPOUs operating as COUs vs BOUs. While BOUs are not required to have a dispute resolution mechanism in place, COUs are required to do so. Customers and participants may be impacted by inconsistent BBPS services if there is no mandatory dispute resolution mechanism for BOUs. Furthermore, transactions were classified as ON-US and OFF-US for settlement reasons under earlier criteria. The Directions haven’t specifically addressed this classification, though. The step towards boosting involvement in the BBPS ecosystem, which has been a persistent endeavour by the RBI in recent years, is another significant aspect of the updated rules. To achieve the same goal, the RBI has in the past taken actions like lowering the net worth limits and broadening the biller categories. The removal of the extra restrictions for non-banking businesses and the expansion of participation to include a range of financial firms under the current regime represent a deliberate attempt on the part of the regulator to promote greater inclusion and creativity within the BBPS ecosystem. While the Directions are essentially intended to improve the clarity and efficiency of the BBPS framework, there may be difficulties in guaranteeing consistency and efficacy throughout the system due to the way that dispute resolution methods are treated differently amongst BBPOUs operating as COUs and BOUs.

Conclusion

The Bharat Bill Payment System (BBPS) Directions, 2024, issued by the Reserve Bank of India, are a major regulation change designed to streamline bill payment procedures and improve consumer safety. The NPCI-managed BBPS is a specialized payment system. The RBI aims to streamline activities within its framework by replacing earlier instructions with these Master Directions. The contrast between BBPCU and BBPOUs, with COUs and BOUs having different responsibilities in the system, is one of the regulation’s key elements. Although the Directions seek to expedite the processes for settling disputes, there are differences between the standards for COUs and BOUs that could affect the consistency of services.

Author: Ananta Chopra, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at  Khurana & Khurana, Advocates and IP Attorney.

References

1. Reserve Bank of India, https://www.rbi.org.in/commonperson/English/scripts/Notification.aspx?Id=2304.
2. RBI streamlines Bharat Bill Payment System, customers get more protection, (Mar. 1, 2024), https://bfsi.economictimes.indiatimes.com/news/policy/rbi-streamlines-bharat-bill-payment-system-customers-get-more-protection/108131268.
3. RBI introduces revised Bharat Bill Payment System guidelines 2024: Check details, (Mar. 1, 2024), https://upstox.com/news/business-news/financial-regulations/rbi-introduces-revised-bharat-bill-payment-system-guidelines-2024/.