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What are Digital Banking Units (DBUs)?

Digital Banking Units (DBUs), the guidelines for which were issued by Reserve Bank of India (RBI) in April 2022, have been virtually launched in October 2022.

What is Digital Banking Unit (DBU)?

Digital Banking Unit (DBU) is – 

  • A specialised fixed point business unit / hub housing certain minimum digital infrastructure
  • For delivering digital banking products & services as well as servicing existing financial products & services digitally, in both self-service and assisted mode
  • To enable customers to have cost effective / convenient access and enhanced digital experience to / of such products and services in an efficient, paperless, secured and connected environment 
  • With most services being available in self-service mode at any time, all year round

What is the basis of the guidelines on DBUs?

In pursuance of the budget announcement a ‘Committee for establishment of Digital Banking Units (DBUs)’ was set-up by Reserve Bank of India (RBI) to outline a roadmap for establishment of DBUs. 

Based on the recommendations of the Committee, the guidelines on ‘Establishment of Digital Banking Units’ were finalised.

What is Digital Banking?

‘Digital Banking’ refers to –

  • Present and future electronic banking services provided by a licensed bank for the execution of financial, banking and other transactions and / or 
  • Orders / instruments through electronic devices / equipment over web sites (i.e online banking), mobile phones (i.e mobile banking) or other digital channels as determined by the bank
  • Which involve significant level of process automation and cross-institutional service capabilities running under enhanced technical architecture and differentiated business model / strategy

What is Digital Banking Segment?

‘Digital Banking Segment’, for the purpose of disclosure under Accounting Standard 17 (AS-17), is a sub-segment of the existing ‘Retail Banking’ Segment which will now be sub-divided in to –

  1. Digital Banking 
  2. Other Retail Banking

The business involving digital banking products acquired by DBUs or existing digital banking products would qualify to be clubbed under this segment.

What are digital banking products and services?

Digital banking products and services would generally mean those financial products / services whose designs and fulfilments have nearly end-to-end digital life cycle with the initial customer acquisition / product delivery necessarily taking place digitally through self-service or assisted self-service.

Which entities can set up DBUs?

Scheduled Commercial Banks (other than Regional Rural Banks, Payments Banks and Local Area Banks) with past digital banking experience are permitted to open DBUs in Tier 1 to Tier 6 centres, without requiring permission from RBI in each case.

DBUs of the banks are treated as Banking Outlets (BOs) as defined in circular on ‘Rationalisation of Branch Authorisation Policy - Revision of Guidelines’ dated May 18, 2017. For compliance with regulatory requirements on opening of BOs during a financial year, the DBUs are treated as opened in a centre from where the significant parts of its new business are proposed to be sourced, regardless of its physical location.

Who is the head of DBUs?

To accelerate digital banking initiatives, each DBU is headed by a sufficiently senior and experienced executive of the bank, preferably Scale III or above for PSBs or equivalent grades for other banks who can be designated as Chief Operating Officer (COO) of DBU.

What are the reporting timelines for DBUs?

Performance update with respect to DBU to be furnished to Department of Supervision (DoS), RBI on monthly basis and in a consolidated form in Annual Report of the bank.

Banks need to furnish information relating to opening, closure, merger or shifting of DBUs online through Central Information System for Banking Infrastructure (CISBI) portal to Department of Statistics and Information Management (DSIM), RBI.

How many DBUs have been set up?

75 DBUs have been set up in 75 districts in India to commemorate the 75 years of our independence (Azadi ka Amrit Mahotsav).

DBUs is a joint initiative of Government, RBI, Indian Banks Association and participating banks.

Which services will be offered by DBUs?

As mentioned by Shri Shaktikanta Das, Governor, RBI in his welcome remarks on the occasion of virtual launch of DBUs – 

  • The specific financial services to be provided by the DBUs include, among other things, savings, credit, investment and insurance. 
  • On the credit delivery front, to start with, the DBUs will provide end-to-end digital processing of small ticket retail and MSME loans, starting from online applications to disbursals. 
  • The DBUs will also provide services related to certain identified government sponsored schemes. 
  • The products and services in these Units will be provided in two modes, namely, self-service and assisted modes, with self-service mode being available on 24*7*365 basis. 
  • The banks are also free to engage the services of digital business facilitators and business correspondents to expand the footprint of the DBUs.


References

Reserve Bank of India. (2022, April 07). 'Establishment of Digital Banking Units (DBUs)'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12285&Mode=0

Reserve Bank of India. (2022, April 07). 'RBI releases Guidelines on Establishment of Digital Banking Units (DBUs)'. Retrieved from https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=53528

Reserve Bank of India. (2022, October 16). 'Virtual Launch of DBUs (Welcome Remarks by Shri Shaktikanta Das, Governor, Reserve Bank of India on October 16, 2022)'. Retrieved from https://www.rbi.org.in/Scripts/BS_SpeechesView.aspx?Id=1330


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