Hi Rahul,
1. You can reverse the BCM Batch using program RBNK_MERGE_RESET - Refer OSS Note 1577912. This resets all the batches in the collector.
If you want to reverse only certain batches in the collector implement OSS Note 1681517.
2. Reversal is possible only before payment file is created - meaning before final approval is completed.
3. No need for any specific configuration to enable reversal.
Hope this answers your questions. Please read the above OSS Notes as they are very informative.
Kalyan