All You Need to Know About the Launch of 75 Digital Banking Units
Ketki Jadhav
May 10, 2022
Listen to All You Need to Know About the Launch of 75 Digital Banking Units
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The Finance Minister, Ms Nirmala Sitaraman, announced in the Union Budget for the FY 2022-23 that 75 Digital Banking Units would be set up in 75 different districts. To facilitate this, the RBI has released comprehensive guidelines on Digital Banking Units in the last month, and these units are expected to become operational by August 15, 2022.
"In recent years, digital banking, digital payments, and fintech innovations have grown at a rapid pace in the country. The government is continuously encouraging to ensure that the benefits of digital banking reach every nook and corner in a consumer-friendly manner.", said Ms. Sitharaman in the Budget.
"Taking forward this agenda, and to mark 75 years of independence, it is proposed to set up 75 digital banking units in 75 districts of the country by scheduled commercial banks. The financial support for the digital payment ecosystem - announced in the previous Budget - will continue in 2022-23 as well.", she added. This will encourage further adoption of digital payments. And there will also be a focus on promoting the use of payment platforms that are economical and user-friendly.
To facilitate this announcement in the budget, all state banks, 10 private sector banks, and one small finance bank have started working to operationalise 75 Digital Banking Units by July 2022, said the Indian Banks' Association (IBA) on Thursday.
DBUs will be specialised fixed point business units for delivering digital banking products and services as well as digitally servicing existing financial products and services offered by the banks.
According to IBA, the State Bank of India (SBI) will set the highest number of DBUs (12), followed by Union Bank of India (UBI) and Punjab National Bank (PNB), who will set up 8 DBUs each, Bank of Baroda (BoB) 7, Canara Bank 6, and India Bank 3. Among private banks, ICICI Bank and Axis Bank will set up 3 DBUs each, and HDFC Bank will set up 2 DBUs. A committee of the RBI is monitoring the progress in the pilot implementation.
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As per the IBA statement, the DBUs will be treated as banking outlets, and each DBU needs to be housed distinctly, with separate entry and exit provisions. Moreover, each unit has to offer certain minimum digital banking products and services, both on the asset (loans) and liabilities (deposits) side. The banks will man these units with at least 3-4 personnel so that while tech-savvy customers operate on their own, those who need assistance and first-time users will be served by the specialised bank staff.
The banks will have the option to engage digital business facilitators (business correspondents) in sync with relevant regulations to expand the virtual footprint of the DBUs.
"Also, there shall be an adequate digital mechanism to offer real-time assistance and redress customer grievances arising from business and services offered by the DBUs directly or through business facilitators/ correspondents.", said the IBA.
The panel for DBUs establishment was set up under Mr Ajay Kumar Choudhary, Executive Director, Fintech Department of the RBI, with the representation of senior officials from the RBI, select banks, and IBA. Besides assisting the committee, a working group was constituted under Mr Sunil Mehta, Chief Executive IBA.
The RBI said that the emphasis has been given to customer education on a digital journey, cyber security awareness, and safeguards.
Impact:
As per the new guidelines given by the RBI, the DBUs are expected to migrate to delivering more structured and custom-made products from standard offerings using their hybrid and high-quality interactive capabilities.
Moreover, since RBI allows banks to adopt more core-independent digital-native technologies, it will provide them with flexibility and scalability in creating new digital environments through software deployment and interconnectivity for the business segment based on their digital strategy. To ensure the security is unthreatened, the RBI mandates that if the digital banking segment of a bank uses an API layer (integration layer) to connect with external third-party application providers, the same has to be tested in an isolated environment before being integrated to bank's core systems backed by a comprehensive risk evaluation and adequate documentation.
The developments have been so rapid that most banks seem to be unprepared for the same. Considering that major scheduled commercial banks have already been promoting digital banking to their customers and most of their customers are actively using the digital platform, the DBUs will not add an enormous value to them. However, the DBUs might help in expanding the reach of digital banking in semi-urban and rural areas, which is a primary objective of the plan.
To Conclude:
A Digital Banking Unit will essentially be a physical front-end facility of a bank. It will serve as a physical banking outlet that houses specific digital infrastructure that will provide existing banking services like banking, cash withdrawal, loans, and kiosks for carrying out digital banking or purchasing the insurance and investment products distributed by the bank. The DBUs will be a cost-effective and efficient mode for banks to expand the reach of digital banking to the customers from rural areas with an enhanced customer service experience.
Warm Regards,
Ketki Jadhav
Content Writer