Digital Banking Units

Digital Banking Units

Why in the news?

Finance Minister Nirmala Sitharaman has reiterated her Budget announcement on setting up 75 digital banking units in 75 districts of the country this year.

Earlier, the Reserve Bank of India announced the guidelines for DBUs, following the report of a working group of the Indian Banks Association.

What?

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.

By whom?

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.

Why?

• DBU must offer certain minimum digital banking products and services– both liabilities and assets side of the balance sheet of the digital banking segment.
• Digitally value-added services to conventional products.
  • savings bank accounts under various schemes,
  • current accounts, fixed deposits
  • 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).
  • 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 different from Neo-banks?

Fintechs operating as neobanks offer digital banking services but they do so in partnership with non-banking financial companies (NBFCs). Examples- Jupiter, Fi Money, Niyo, Razorpay X.