Digital banks

Digital banks

Subject :Economy

Context:

Prime Minister Narendra Modi dedicated 75 digital banking units to the nation.

Details:

• The Union Budget for 2022-23 proposed to set up 75 Digital Banking Units (DBUs) in 75 districts of the country by Scheduled Commercial Banks.
• It would further financial inclusion and improve banking experience for the citizens.
• Both ICICI Bank and HDFC have announced plans to set up DBUs.
  • The  DBUs will have 2 distinct features – a Self-service Zone and a Digital Assistance Zone.

Concept:

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.

Services offered?

• 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.
  • saving bank accounts under various schemes,  current accounts, fixed deposit  and recurring deposit accounts,
  • digital kits for customers, mobile banking and Internet banking,
  • debit cards, credit cards, and mass transit system cards,
  • digital kits for merchants,
  • UPI QR codes, BHIM Aadhaar and point of sale (PoS).
  • making applications for and onboarding customers for identified retail, MSME or schematic loans.
    • 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.
  • Other services-balance-check, printing passbooks, transfer of funds, investment in fixed deposits, loan applications, stop-payment instructions for cheques issued, tax and bill payment and nominations.

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.