Skip to main content

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


Follow at - Telegram   Instagram   LinkedIn   Twitter

Labels:

Comments

Post a Comment

Popular Posts

Report of the Committee to develop a Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI) in the Financial Sector

Reserve Bank of India (RBI) has released the report of the committee to develop a framework for responsible and ethical enablement of artificial intelligence (FREE-AI) in the financial sector. Committee to develop a Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI) in the Financial Sector In the financial sector, Artificial Intelligence (AI) has the potential to unlock new forms of customer engagement, enable alternate approaches to credit assessment, risk monitoring, fraud detection, and offer new supervisory tools. At the same time, increased adoption of AI could lead to new risks like bias and lack of explainability, as well as amplifying existing challenges to data protection, cybersecurity, among others. To encourage the responsible and ethical adoption of AI in the financial sector, the committee to develop a Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI) in the Financial Sector (Chairperson: Dr. Pushpak B...
Post a Comment
Read more

Lending against Gold and Silver collateral

Reserve Bank of India (RBI) has issued directions on lending against the collateral of gold and silver. To whom are the directions applicable? The directions are applicable to the following regulated entities (REs) – Commercial Banks (including Small Finance Banks, Local Area Banks and Regional Rural Banks, but excluding Payments Banks). Primary (Urban) Co-operative Banks (UCBs) & Rural Co-operative Banks (RCBs), i.e., State Co-operative Banks (StCBs) and Central Co-operative Banks (CCBs). Non-Banking Financial Companies (NBFCs), including Housing Finance Companies (HFCs). Which loans are covered under the directions? The directions shall apply to all loans offered by an RE for the purpose of consumption or income generation (including farm credit) where eligible gold or silver collateral is accepted as a collateral security. What is eligible collateral? Eligible collateral means the collateral of jewellery, ornaments or coins made of gold or silver. A lender shall not grant any ad...
Post a Comment
Read more

All about RBI Integrated Ombudsman Scheme, 2021

Filed a complaint against a bank / financial institution but haven’t received a reply for more 30 days? Or received a reply but not satisfied with the resolution offered by the bank / financial institution? Or the complaint was rejected by the bank / financial institution? You can approach RBI Ombudsman under the RBI Integrated Ombudsman Scheme, 2021. What is RBI Integrated Ombudsman Scheme (RBI-IOS), 2021? RBI-IOS was launched on November 12, 2021, by integrating the existing 3 Ombudsman schemes of RBI. RBI-IOS adopts ‘One Nation One Ombudsman’ approach by making the RBI Ombudsman mechanism jurisdiction neutral. It provides cost-free redress of customer complaints involving deficiency in services rendered by entities regulated by RBI. Which schemes are integrated in RBI-IOS? RBI-IOS integrates following existing schemes of RBI – Schemes Powers derived from Entities covered Banking Ombudsman Scheme, 2006 Section 35A of BR Act, 1949 S...
Post a Comment
Read more

Investments in Debt Instruments by Non-residents

Reserve Bank of India (RBI) has issued directions on investments in debt instruments by non-residents. What are the channels for investments in debt instruments by non-residents? General Route – for investment in Government securities and corporate debt securities by Foreign Portfolio Investors (FPIs) subject to specified investment limits and macro-prudential limits. Voluntary Retention Route (VRR) – for investments in Government securities and corporate debt securities, free of certain macro-prudential limits applicable to FPI investments in debt markets under the General Route, by FPIs that commit to remain invested for a stipulated retention period. Fully Accessible Route (FAR) – for investments by non-residents in certain specified categories of Central Government securities (‘specified securities’) without any restriction. Scheme for Trading and Settlement of Sovereign Green Bonds (SGrBs) issued by the Central Government by eligible foreign investors in the International Finan...
Post a Comment
Read more

Authentication mechanisms for digital payment transactions

Reserve Bank of India (RBI) has issued directions on authentication mechanisms for digital payment transactions. What is the rationale behind the directions? All digital payment transactions in India are required to meet the norm of two factors of authentication. While no specific factor was mandated for authentication, the digital payments ecosystem has primarily adopted SMS-based One Time Password (OTP) as the additional factor. To enable the payments ecosystem to leverage the technological advancements for implementing alternative authentication mechanisms, RBI has issued the directions on authentication mechanisms for digital payment transactions. What is Authentication? Authentication is a process of validating and confirming the credentials of the customer who is originating the payment instruction. What is Factor of Authentication? Factor of Authentication is the credential of the customer which is used for authentication. The factors of authentication can be from “something the...
Post a Comment
Read more