Financial inclusion efforts over the last decade have dramatically improved rural bank account penetration in India. With mobile access in rural India reaching 45% and digital payments steadily gaining traction, a new generation of aspirational, digitally-aware consumers is emerging, demanding services that are faster, simpler, and more accessible.
Yet, one essential daily payments service remains surprisingly underutilized: bill payments.
Digitizing bill payments isn’t just about convenience—it’s a foundational enabler for deeper financial inclusion, opening the door to credit, savings, insurance, and other formal financial services.
In 2024, transactions on the Bharat Bill Payment System (BBPS)—India’s centralized digital bill payment platform—doubled to 2.2 billion, with transaction values reaching ₹7.7 lakh crore. Despite this impressive growth, less than 30% of bills are paid digitally. Most payments still rely on cash or hybrid (phygital) methods, leading to long queues, lost time, and avoidable travel.
While services like cash withdrawals and mobile recharges have successfully gone digital, rural households continue to pay utility bills, school fees, and government dues the traditional way—by visiting physical offices, often over long distances.
The result? A vast, under-tapped opportunity for India’s banks, especially those rooted in rural communities.
So, what’s holding things back?
The RRB Dilemma
At the centre of this story are Regional Rural Banks (RRBs)—India’s grassroots banking institutions, formed in 1976 to serve the nation’s agricultural and underbanked communities. Today, 43 operational RRBs cater to millions across the country. But many remain trapped in the amber of legacy infrastructure.
A 2023 study by the Institute for Development and Research in Banking Technology (IDRBT) revealed that 70% of RRBs still rely on outdated core banking systems, many of which aren’t designed for API-driven integrations like BBPS. The result: a yawning digital capability gap.
Meanwhile, private banks and fintech companies are aggressively expanding to tap into digital payment services in rural India, capturing a growing share of the market. Unlike RRBs, they have the agility to innovate quickly, offering intuitive, mobile-first experiences and embedding financial services directly into everyday transactions.
If RRBs fail to adapt, they risk being left behind in the very markets they were created to serve.
BBPS: A Gateway to Inclusion
BBPS is often seen as just a bill payment platform. But for RRBs, it is much more than that—it’s a revenue multiplier, a customer engagement tool, and a strategic opportunity to leapfrog into digital payments.
BBPS currently supports over 20 billing categories, from electricity and telecom bills to education fees and insurance payments. With transaction volumes expected to hit 400 million per month by 2025, RRBs that integrate BBPS today will be well-positioned to capitalize on this growth.
By adopting BBPS, RRBs can:
- Broaden their service offerings beyond basic banking to include bill payments, education fees, tax payments, and insurance premiums, positioning themselves as one-stop payment hubs for their customers.
- Enhance customer loyalty by providing a single, hassle-free platform for multiple payments, reducing the need for customers to visit multiple offices or websites.
- Forge local partnerships with schools, electricity boards, and panchayats to onboard them as billers, increasing transaction volumes while supporting the local economy.
- Unlock new revenue streams through cross-selling financial products to consumers and billers.
Emerging Bill Payment Growth Segments
To fully leverage BBPS, RRBs must focus on high-growth payment categories that will drive revenue and engagement:
- Education Fees: As schools and colleges increasingly move to digital payments, BBPS offers an efficient channel to process fees, opening doors to new customer segments.
- Tax Payments: BBPS supports income tax, GST, and municipal tax payments, a category that saw a 30% rise in transactions in 2024 alone.
- Insurance Premiums: With rising rural demand for insurance, BBPS enables easy premium payments, facilitating cross-sell opportunities for RRBs.
- National Pension Scheme: Simplifies pension contributions, encouraging long-term financial planning.
- FASTag Recharge: As highway traffic grows 10% annually, rural FASTag payments are projected to reach ₹15,000 crore by 2025. BBPS allows RRBs to tap into this recurring transaction stream.
Breaking the Technology Barrier
Some RRBs are already leading the way.
Kerala Gramin Bank and Karnataka Gramin Bank—two progressive institutions—have partnered with NPST, an NBBL-approved Technology Service Provider, to embed BBPS into their digital ecosystems.
Kerala Gramin Bank has enabled over 600 branches to function as rural bill payment centres. Its mobile app offers instant confirmations, multilingual support, and stored payment history—delivering a better user experience while lowering operational costs.
Also Read | The Critical Need for Technology Modernisation in Banking
Karnataka Gramin Bank, meanwhile, has gone a step further—creating an ecosystem that connects local billers, branches, and business correspondents. The app allows even non-account holders to transact using just a mobile number—a move that significantly broadens its reach and relevance.
The Road Ahead
With BBPS projected to hit 400 million transactions per month by 2025, the momentum is undeniable. The digital payments pie is growing, and RRBs must act now if they are to claim their share.
The urgency isn’t just about modernisation. It’s about remaining relevant to a generation of rural consumers who expect their banks to be as mobile as they are.
Service providers like NPST can help banks transition smoothly into the digital era, meet evolving customer expectations, and embrace BBPS, digitize bill payments, and take a central role in shaping rural India’s digital payments transformation.
Because in the race to serve India’s next billion, there’s no time to wait.
Views Expressed By: Deepak Chand Thakur, Co-founder and CEO, NPST
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