India Opens Up Bharat Bill Payment System To Smaller Non-Bank Users

June 7, 2022
A new amendment to India’s Bharat Bill Payment System guidelines means that smaller non-bank entities will now be eligible to join.

A new amendment to India’s Bharat Bill Payment System (BBPS) guidelines means that smaller non-bank entities will now be eligible to join.

As of May 26, the minimum net-worth requirement for non-banks to apply to use the BBPS was reduced from ₹100 crore ($12.9m) to ₹25 crore ($3.25m).

The amendment to the BBPS guidelines was approved by the Reserve Bank of India (RBI) in April this year, when the central bank issued a statement explaining its reasons for the change.

The ₹100 crore net-worth requirement was too high, the RBI said, and had become a “constraint to greater participation” in the BBPS.

The RBI, therefore, proposed that the net-worth requirement for non-bank BBPS operating units be aligned with that of other non-bank participants who handle customer funds, such as payment aggregators, that have a similar risk profile.

The BBPS is an interoperable platform for bill payments, whose scope extends to all categories of billers who raise recurring transactions.

According to the RBI, BBPS users enjoy benefits such as a standardised bill payment experience, a centralised customer complaint resolution mechanism and a prescribed customer convenience fee.

Over the years, the RBI claims that these conveniences have led the BBPS to increase both its total transaction volume and total number of onboarded billers, before this began to plateau prior to the latest amendment.

By lowering the entry requirements for participants, the RBI will hope to further boost usage of digital bill payments. Despite increased usage in recent years, these channels are still relatively undeveloped.

According to the National Payments Corporation of India (NCPI), there were 668m transactions made via the BBPS in the year ending March 2022, representing a 142 percent increase on the previous year. However, annually this represents an average of just 0.5 transactions per capita.

Even at a household level, this represents around just two bills per Indian household.

Similarly, according to the RBI, total debit transfers and direct debits, another key mechanism for bill payments, reached 1.2bn for the year ending March 2022, or four transactions per household.

Bill and regular payments are an important use case for developing and growing electronic payments, adding consumer convenience while reducing costs and providing greater certainty for billers chasing payments.

With increasing global trends towards regular payments, particularly through the increasing popularity of streaming and other subscription-based services, improving participation in bill payment solutions can be seen as a vital component to further extend digital payments in the country.

Background to BBPS

Since its launch in 2015, the NCPI has functioned as the authorised Bharat Bill Payment Central Unit (BBPCU), responsible for setting the standards for the BBPS processes to which all operating units must adhere.

The NPCI also undertakes clearing and settlement activities related to the BBPS.

Prospective participants of the BBPS system are advised to interact with the NPCI to work out their modalities for the BBPS, and to prepare for authorisation/approval, if required, under the Payment and Settlement Systems Act 2007.

Applications should then be submitted to the RBI for authorisation.

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