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Digital banking unit norms: 24×7 operations, in tier 1-6 centres
Explained: What are Digital Banking Units, and what services will they provide?

Banking and Finance, Digital banking unit, Reserve Bank of India, Nirmala Sitharaman, Business news, Indian express business news, Indian express, Indian express news, Current AffairsThe Reserve Bank said each DBU must offer certain minimum digital banking products and services. REUTERS/File Photo

The Reserve Bank of India (RBI) on Thursday released the guidelines on establishment of digital banking units (DBUs) after Finance Minister Nirmala Sitharaman, in her Budget speech for fiscal 2022-2023, had announced setting up of 75 DBUs in 75 districts to commemorate 75 years of independence of the country.

DBU is a specialised fixed point business unit or hub housing certain minimum digital infrastructure for delivering digital banking products and services as well as servicing existing financial products and services digitally in self-service mode at any time, all year round, the RBI said.

Commercial banks (other than RRBs, payment banks and LABs) with past digital banking experience are permitted to open DBUs in tier 1 to tier 6 centres, unless otherwise specifically restricted, without having the need to take permission from the RBI in each case, the central bank added.

As per the RBI, each DBU must offer certain minimum digital banking products and services. Such products should be on both liabilities and assets side of the balance sheet of the digital banking segment. Digitally value-added services to conventional products would also qualify as such. DBUs are expected to migrate to more structured and custom-made products, from standard offerings by use of its hybrid and high-quality interactive capabilities, it said.

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The services include saving bank accounts under various schemes, current account, fixed deposit and recurring deposit account, digital kit for customers, mobile banking, internet banking, debit card, credit card, and mass transit system cards, digital kit for merchants, UPI QR code, BHIM Aadhaar and point of sale (PoS).

Other services include making applications for and onboarding of customers for identified retail, MSME or schematic loans. This may also include end-to-end digital processing of such loans, starting from online application to disbursal and identified government sponsored schemes that are covered under the national portal.

Digital services include cash withdrawal and cash deposit only through ATM and cash deposit machines respectively without physical cash acceptance or disbursal across counters, passbook printing, statement generation, transfer of funds (NEFT/IMPS support) and updation of KYC and other personal details.

Finance Minister Nirmala Sitharaman on Tuesday (April 19) reiterated her Budget announcement on setting up 75 digital banking units in 75 districts of the country this year. This is to take forward the government’s agenda of digital financial inclusion.

What was the announcement?

In the Budget for 2022-23, the Finance Minister had said: “In recent years, digital banking, digital payments and fintech innovations have grown at a rapid pace in the country. Government is continuously encouraging these sectors to ensure that the benefits of digital banking reach every nook and corner of the country in a consumer-friendly manner. Taking forward this agenda, and to mark 75 years of our independence, it is proposed to set up 75 Digital Banking Units (DBUs) in 75 districts of the country by Scheduled Commercial Banks”.

What are these DBUs?

Earlier this month, the Reserve Bank of India announced the guidelines for DBUs, following the report of a working group of the Indian Banks Association. A digital banking unit is a specialised fixed point business unit or hub housing certain minimum digital infrastructure for delivering digital banking products and services as well as servicing existing financial products and services digitally in self-service mode at any time.

Who will set up these DBUs?

Commercial banks (other than regional rural banks, payment banks and local area banks) with past digital banking experience are permitted to open DBUs in tier 1 to tier 6 centres, unless otherwise specifically restricted, without having the need to take permission from the RBI in each case.

What are the services that will be provided by these units?

As per the RBI, each DBU must offer certain minimum digital banking products and services. Such products should be on both liabilities and assets side of the balance sheet of the digital banking segment. Digitally value-added services to conventional products would also qualify as such.

The services include savings bank accounts under various schemes, current accounts, fixed deposits and recurring deposit accounts, digital kit for customers, mobile banking, Internet banking, debit cards, credit cards, and mass transit system cards, digital kit for merchants, UPI QR code, BHIM Aadhaar and point of sale (PoS).

Other services include making applications for and onboarding of customers for identified retail, MSME or schematic loans. This may also include end-to-end digital processing of such loans, starting from online application to disbursal and identified government sponsored schemes that are covered under the national portal.

How will these DBUs compete with fintechs?

Currently, fintechs operating as neobanks offer digital banking services but they do so in partnership with non-banking financial companies (NBFCs). Some of the neobanks offering services in India are Jupiter, Fi Money, Niyo, Razorpay X.

Compared to conventional banks with online and mobile banking facilities, neobanks or digital banks excel at product innovation and offer far better digital solutions. However, given the arrangement they have currently with NBFCs or scheduled banks to conduct the actual banking part, some in the industry have pegged these digital banks as “glorified digital distribution companies”.

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First published on: 08-04-2022 at 03:34 IST
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