HIGHLIGHTS:
• The Reserve Bank of India (RBI) recently issued rules for the establishment of digital banking units by Indian banks (DBUs)
• Each DBU must be led by a bank executive with significant expertise
• It was announced in the Union Budget 2022-23, that 75 DBUs would be established in 75 districts
The Reserve Bank of India (RBI) recently issued rules for the establishment of digital banking units by Indian banks (DBUs). In the Union Budget 2022-23, it was announced that 75 DBUs would be established in 75 districts.
About Digital Banking Units
A digital banking unit (DBU) is a specialised business unit that holds the bare minimum of digital infrastructure for the delivery of digital banking services and products. The DBU’s goal is to increase financial inclusion and provide digital financial services.
DBU Policies and Procedures
• Permission to open DBUs has been granted to scheduled commercial banks (SCB) with prior digital banking expertise, according to the criteria.
• They don’t need approval from the Reserve Bank of India to open DBUs in Tier 1 to Tier 6 cities (RBI).
• The DBUs that the SCBs will open will be considered Banking Outlets.
• Each DBU must be housed separately, with separate exit and entry provisions.
• According to the guidelines, DBUs must be distinct from existing Banking Outlets, with appropriate formats available for digital banking consumers.
• For DBU operations, SCBs will have the option of using an outsourced or in-sourced model. The outsourced model must adhere to the outsourcing regulatory criteria.
• The DBUs must be established as part of the SCB’s digital banking strategy.
• The DBUs’ administrative and operational structures must be compatible with the SCBs’ Digital Banking Segment.
• The banks must maintain the physical security of the DBU infrastructure as well as the cyber security of the DBUs.
• To broaden the DBU’s virtual footprint, banks can hire business correspondents.
• There should be sufficient systems in place to address customer issues stemming from the DBUs’ services.
Head of the Digital Banking Units
Each DBU must be led by a bank executive with significant expertise who can be recognised as the DBU’s Chief Operating Officer (COO).
The Digital Banking Units will provide a variety of services.
Certain digital banking services and products will be provided by each DBU. The products must appear on the digital banking segment’s balance sheet on both the assets and liabilities sides.
