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RBI sets norms for digital banking units

  • Category
    Economy
  • Published
    18th Apr, 2022

Context

The Reserve Bank of India (RBI) recently laid down norms to allow commercial banks to open digital banking units (DBU) while mandating minimum products and services that must be offered in these units.

About

About Digital Banking Units (DBU):

  • A digital banking unit (DBU) is a specialised business unit of a bank that houses certain minimum digital banking products and services.
  • A bank can offer specialised digital products at any time all year from these units and also provide existing financial services products.
  • The aim DBU is to enable customers to have cost effective and convenient access and enhanced digital experience 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.”

The Union Budget of 2022-23 had announced the setting up of 75 Digital Banking Units (DBUs) in 75 districts to commemorate the 75 years of independence of our country.

RBI Guidelines:

  • To start with, all scheduled commercial banks with past digital banking experience are allowed to open such units except for regional rural banks, local area banks and payments bank, without prior approval of the RBI in tier-1 to tier-6 cities.
  • Each DBU should be housed distinctly, with separate entry and exit provisions.
  • They will be separate from an existing banking outlet with formats and designs most appropriate for digital banking users.
  • 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.
  • The DBUs are expected to migrate to more structured and custom-made products, from standard offerings by use of its hybrid and high quality interactive capabilities

Benefits of Digital Banking Units (DBUs):

  • Digi banking units will help banks that are now looking to reduce their physical footprint with fewer brick and mortar branches, with a ‘light’ banking approach.
  • DBUs will be cheaper to establish than a new branch, will also require less staff, and can be high-yield units for the parent bank. 
  • They can provide a better customer experience, aided by technology. These units will also encourage more financial literacy and a favorable outlook toward digital banking.
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