The Reserve Bank of India (RBI) on Thursday released guidelines for banks to open digital banking units (DBUs), in a bid to enhance the spread of digital modes of banking in India’s interiors. The guidelines follow an announcement in the FY23 Budget for setting up of 75 DBUs in 75 districts, and lay down the basic minimum services that a DBU must provide.
gIn recent times, digital banking has emerged as the preferred banking service delivery channel along with ‘brick and mortar’ banking outlets. Reserve Bank has been taking progressive measures to improve availability of digital infrastructure for banking services. In furtherance of this objective and as a part of efforts to accelerate and widen the reach of digital banking services, the concept of ‘Digital Banking Units’ (DBUs) is being introduced by the Reserve Bank,” the central bank said in a notification.
The guidelines will apply only to scheduled commercial banks, and not to regional rural banks, payments banks and local area banks. Banks with past digital banking experience will be permitted to open DBUs in tier 1 to tier 6 centres, unless otherwise specifically restricted, without having the need to take permission from the RBI in each case.
Each DBU will be differentiated from other banking outlets by offering a design format best suited to needs of digital users. DBUs must offer certain minimum digital banking products and services. Such products should be on both liabilities and assets sides of the balance sheet of the digital banking segment, the RBI said.
On the liabilities side, banks must offer account opening services, digital kits for customers, including mobile banking, internet banking, debit cards, credit cards and mass transit system cards, as well as digital kits for merchants which could include UPI QR codes, Aadhaar and point of sale (POS)-based infrastructure.
In order to qualify as a DBU, a banking outlet must be able to make applications for and on-boarding of customers for retail, MSME or schematic loans and also administer government sponsored schemes which are covered under the National Portal. The DBU guidelines list seven specific services, including cash withdrawal and deposit through ATM and cash deposit machines, passbook printing services and internet banking kiosks.
Any product or service which a bank is not permitted to offer shall not be offered by the DBU. Banks must put in place adequate digital mechanisms to offer real-time assistance and redress customer grievances arising from business and services offered by the DBUs directly or through business correspondents.
Banks can choose to use front-end equipment in a DBU that is either in-sourced or outsourced. The back-end, including the core banking system and other back office related information systems can be shared with that of the incumbent systems with proper separation. Banks are free to adopt an in-sourced or outsourced model for operations of the digital banking segment including DBUs.
gThe establishment of DBUs should be part of the digital banking strategy of the bank. The operational governance and administrative structure of the DBUs will be aligned with that of the digital banking segment of the bank,” the RBI said.
However, in order to accelerate digital banking initiatives, each DBU must be headed by a sufficiently senior and experienced executive of the bank, preferably scale III or above for public sector banks or equivalent grades for other banks who can be designated as the chief operating officer (COO) of the DBU.
Banks will have to report the digital banking segment as a sub-segment within the existing retail banking segment. Performance updates with respect to DBUs will have to be furnished in a pre-defined reporting format.