RBI Notifications

What are Digital Banking Units (DBUs)?

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.

What services 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 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).

What about lending services?

  • 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.

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

 

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