RBI releases Report of Umesh Bellur headed GIRO Advisory Group

April 28, 2014

The Reserve Bank of India (RBI) released, on its website for public comments, the Report of the GIRO (Government Internal Revenue Order) Advisory Group. GIRO Advisory Group (GAG) was constituted by the RBI in October 2013, under the chairmanship of Prof. Umesh Bellur, Indian Institute of Technology, Bombay to implement a national GIRO-based Indian Bill Payment System.
The panel has recommended a mechanism for centralised bills payment system in India, mainly by laying out 2 organisations:

Bharat Bill Payment Services (BBPS)
Bharat Bill Payment Operating Units (BBPOUs)

Bill Payments in India: Issues and challenges

What do Bill payments in India mainly comprise of?

Bill payments form a key portion of all retail payment transactions. Bills include utility services such as school/university fees, examination fees, Government payments, pre-paid payment instruments top-up, mobile phones recharge/top-up etc.

How are Bill payments at present done in India?

Currently, customers make bill payments at Bill Owners Customer Point (BOCP), cheque drop boxes, bank branches, agent outlets, and via electronic modes. Options available include:

Direct payment to billers – biller operated payment centres, Internet Banking / Payment Gateway, ECS (Electronic Clearing Service).
Aggregators and Banks – Internet Banking, Bill Presentments, Standing Instructions.
Bill Pay Agents – Collection Points, Business Correspondents.

What are the shortcomings observed in the present scenario of bill collection/ payment process in India?

Absence of Interoperability- Limited or no interoperability, thus each biller needs to establish and supervise its own collection points (BOCPs.
Consumer preference for BOCP- A consumer prefers that BOCP where (s)he feels comfortable by a direct payment and an instant printed receipt received for the payment. Due to lack of visibility consumer usually do not trust agents’ networks.
Poor Accessibility-BOCPs are generally concentrated in urban centers and are not easily accessible to people in rural/remote areas.
Lack of coordinated initiative-No industry-driven initiative as of yet to develop a common interoperable system, which would bring about comfort of payment to users and cost and functional efficiency to the Billers.
There is no common website from where all bills can be accessed and smoothly paid .

Why there is a need for a national ‘GIRO-based Indian Bill Payment System’?

Those people who have access to internet banking facility can pay their bills online, however there are a huge number of consumers who don’t have access to internet banking and thus they cannot pay their bills online. Such consumers have to physically go at different places to pay their different bills. Albeit, the ECS (Electronic Clearing Service) debit volume is growing in India at the rate of 5% per annum and in 2012-13 it was Rs 176.50 Million, but, still this is very small when compared with total billing volume in largely populated country like India. Most of the consumers in India still pay their bills by physically visiting different customer outlets.
Therefore, there is a requirement for an interoperable, integrated bill payment system in India which:-

Provides consumers a single point for their various bill payments
Near to place of work or residence
Enables payment of any bill at any place
Allow payments via any mode (cash, cheque, credit card, debit card, prepaid payment instruments etc.)
Includes bank branches, post offices, business correspondents, retail agents of aggregators, ATMs (Automated Teller Machine), etc.
Furnishes quick confirmation of payment made via SMS or a payment receipt
Provides facility of payment of bills via internet banking (if possible a single website), mobile banking and IVRS (Interactive Voice Response System)
Is efficient and cost effectual substitute to the present systems
Motivates billers to switch over to the new system
Sets up billing standards in India
Increases consumer trust and experience
Reduces the expenditure that billers incur on collection of bills at their own collection centres

The above issues and challenges can be resolved if we have a centralised infrastructure for bill payments in India which brings about interoperability with an all India-standard.

What is the Model for pan-India centralised bill payment in India as suggested by the Umesh Bellur headed GIRO Advisory Group?

The pan-India centralised bill payments infrastructure would have two types of entities:

Bharat Bill Payment System (BBPS)- Will set standards and conduct of centralised payment, clearing and settlement process
Bharat Bill Payment Operating Units (BBPOUs)- Will act as operating unit(s)
The model would thus be a 2-tier structure with a single standard setting body (BBPS) with payment and settlement functionalities/responsibilities and multiple operating entities (BBPOUs).

Bharat Bill Payment System (BBPS)
A ‘not-for-profit organization’ registered under the Companies Act 1956, like NPCI (National Payments Corporation of India). It shall have a Steering Group constituting of representatives from the participating BBPOUs and other stake holders.The Roles and Responsibilities of BBPS include:

Setting Business standards and processes the BBPOUs, management of dispute resolution, standards for information exchange.
Marketing and brand positioning of the pan-India Bharat Bill payments system
Accomplishing payment, clearing and settlement of the transactions executed at several BBPOUs
Act as final dispute resolution escalation point
Set up a single website on behalf of the brand for online payment of bills

Bharat Bill Payment Operating Units (BBPOUs)

A for–profit company registered under the Companies Act 1956 and has obtained requisite certification from BBPS for participating in the the centralised bill payments system.
Roles and Responsibilities of BBPOUs:-