Policy Update: RBI changes NEFT timings, expands the scope of BBPS, among others

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Policy Update: RBI changes NEFT timings, expands the scope of BBPS, among others

Komal Gupta

@Komal

August 9, 2019

Public Policy

918

Context

On 7 August, the Reserve Bank of India (RBI) announced a slew of policy measures aimed at accelerating the adoption of digital payments in the country. These include, revision of National Electronic Funds Transfer (NEFT) timings to make it a 24×7 facility, expanding the scope of utility bill payments and encouraging more entities to enter the retail payments space.

The Central Bank has also proposed to set up a Central Payments Fraud Information Registry in a bid to improve the confidence of customers in the digital payment systems.

“In order to carry forward these efforts and ensure quick and systemic responses, it is proposed to facilitate the creation of a Central Payment Fraud Registry that will track these frauds. Payment system participants will be provided access to this registry for near-real time fraud monitoring,” the RBI said in Statement on Developmental and Regulatory Policies post the monetary policy review. The meetings of the Monetary Policy Committee (MPC) are held at least 4 times a year and it publishes its decisions after each such meeting. This was the third meeting of the six-member MPC for financial year 2019-20.

Key Highlights

Round-the-clock availability of National Electronic Funds Transfer System

Currently, NEFT payment system operated by the Reserve Bank as a retail payment system is available for customers from 8.00 am to 7.00 pm on all working days of the week (except 2nd and 4th Saturdays of the month). As mentioned in the Payment System Vision 2021 document, the Reserve Bank will make available the NEFT system on a 24×7 basis from December 2019. This is expected to revolutionise the retail payments system of the country.

Expansion of biller categories for Bharat Bill Payment System

The Bharat Bill Payment System (BBPS), an interoperable platform for recurring bill payments, currently covers five segments viz., direct-to-home (DTH); electricity; gas; telecom; and water bills. In order to leverage the advantages of the BBPS and harness its full potential, RBI has decided to permit all categories of billers (except prepaid recharges) who provide for repetitive bill payments to participate in BBPS on a voluntary basis. Apart from digitisation of cash-based bill payments, these segments would also benefit from the standardised bill payment experience for customers, centralised customer grievance redressal mechanism, prescribed customer convenience fee and the like. Detailed instructions in this regard will be issued by the end of September 2019, said RBI.

‘On-tap’ authorisation for Retail Payment Systems

In order to benefit from diversification of risk as also to encourage innovation and competition, the Central Bank has decided to offer ‘on tap’ authorisation to entities desirous to function/operate/provide platforms, such as-

Bharat Bill Payment Operating Unit (BBPOU)
Trade Receivables Discounting System (TReDS)
White Label ATMs (WLAs)

This means that entities operating in the above sectors can apply for license with the RBI at any time, subject to the fulfilment of the set conditions. Detailed instructions to this effect will be issued by the end of September 2019, said RBI.

The move comes after RBI received suggestions from individuals, public and private entities, institutions and industry associations on the need to encourage more players to participate in and promote pan-India payment platforms. The comments/feedbacks was received by the Central Bank on a policy paper on minimising concentration risk in retail payment systems from a financial stability perspective, which was put for public consultation.

Creation of a Central Payments Fraud Information Registry

RBI has proposed to create a Central Payment Fraud Registry that will track digital payments frauds in real time. The aggregated fraud data will be published to educate customers on emerging risks. The Reserve Bank will promote use of such analytics to proactively identify instances and aspire for prediction of frauds to help instant response and recovery actions, such as blocking irregular transactions, before the payment authorisation, it said in its Payment System Vision 2021, which envisaged a framework for collecting data on frauds in the payment systems.

Earlier this year, the Nandan Nilekani led high-level committee’s report on deepening of digital payments also suggested a similar policy to curb payments fraud. The report said, the RBI must ensure that once the fraud was traced to the source, the culprits are apprehended and prosecuted to the fullest extent of the law. Such cases also must be publicized to ensure that customers have confidence in the abilities of the bank to prosecute and future criminals are deterred, it added.

The report also suggested that all payment transactions must be rated for fraud risk, and payment schemes could be allowed to reject high-risk transactions, to use more factors of authentication before processing payments instructions.

At present, there is a mechanism in place for banks to report all banking frauds to the Central Fraud Monitoring Cell of the Reserve Bank.

“With the digital payment ecosystem making substantial progress in terms of growth of payment infrastructure as well as volume and value of digital payment transactions, fraud risk monitoring and management by the stakeholders have assumed importance. It has always been the endeavor of the Reserve Bank to improve the confidence of customers in the payment systems,” said the 7 August statement by RBI. A detailed framework in this regard will be put in place by the end of October 2019, it added.

Other decisions

The Central Bank lowered its repo rate by an unconventional 35 basis points (bps) to 5.4%.
It introduced stripping/reconstitution facility for State Development Loans (SDLs). This will be implemented in consultation with the respective state governments.
A reduction in risk weight for consumer credit except credit card receivables was announced. Guidelines in this regard would be issued by the end of August 2019, said RBI.
A series of measures have been announced to enhance credit flow to NBFC sector. It includes harmonisation of single counterparty exposure limit for banks’ exposure to single NBFCs with general single counterparty exposure limit, and permitting banks to on-lend through NBFCs in a move to increase the credit flow to certain priority sectors.

RBI Digital Payments Nandan nilekani MPC default registry repo rate NEFT BBPS Bharat Bill Pay monetary policy Vision 2021 utility bill

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Komal Gupta

Policy Analyst

Policy Professional| Former Tech and Business Journalist|