Note4Students

From UPSC perspective, the following things are important :

Prelims level: Digital Banking Units (DBUs)

Mains level: Read the attached story

dbu

PM has dedicated 75 digital banking units to the nation, taking forward an announcement that was made in the 2022-23 Union Budget.

What are DBUs?

A digital banking unit is a specialized fixed point business unit or hub, housing a certain minimum digital infrastructure for delivering digital banking products and services.
It aims at servicing existing financial products and services digitally in self-service mode at any time.
The RBI has announced the guidelines for DBUs, following the report of a working group of the Indian Banks Association (IBA).

Who can 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.
They are permitted, unless otherwise specifically restricted, without having the need to take permission from the RBI in each case.

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 saving bank accounts under various schemes, current accounts, fixed deposit and recurring deposit accounts, digital kits for customers, mobile banking etc.
It also includes- 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).

Other services include making applications for and onboarding 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.

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, some in the industry have pegged these digital banks as “glorified digital distribution companies”.