To expand digital financial services and financial inclusion, the Reserve Bank of India (RBI) has permitted Scheduled Commercial Banks (SCBs) with past digital banking experience to open Digital Banking Units (DBUs) in Tier 1 to Tier 6 centres .

The central bank, on Thursday, released guidelines for SCBs (other than Regional Rural Banks, Payment Banks and Local Area Banks) on establishment of DBUs.

This is pursuant to an announcement made in the Union Budget FY23 for setting up of 75 DBUs in 75 districts to commemorate 75 years of India’s independence.

A DBU is a specialised fixed point business unit/ hub housing certain minimum digital infrastructure for delivering digital banking products and services as well as servicing existing financial products and services digitally, in both self-service and assisted mode at any time, all year round, according to the RBI.

The banking regulator emphasised that establishment of DBUs should be part of the digital banking strategy of the bank

The central bank said DBUs of banks will be treated as Banking Outlets (BOs). Each DBU has to be housed distinctly, with the separate entry and exit provisions. They will be separate from an existing BO with formats and designs most appropriate for digital banking users.

Each DBU is required to offer certain minimum digital banking products and services, per the guidelines.

Such products should be on both liabilities and assets side of the balance sheet of the digital banking segment. Digitally value-added services to conventional products would also qualify as such.

DBUs have to offer liability products and services such as account opening, digital kit for customers (mobile and internet banking, debit and credit cards, and mass transit system cards) and digital kit for merchants (UPI QR code, BHIM Aadhaar, POS, among others).

On the assets side, DBU have to enable making applications for and on-boarding of customer for identified retail, MSME or schematic loans; and identified Government sponsored schemes which are covered under the National Portal.

On the digital services front, DBUs have to allow cash withdrawal and cash deposit only through ATM and Cash Deposit Machines respectively; passbook printing / statement generation; internet banking kiosk; transfer of funds; updation of KYC / other personal details. 

The RBI said any product or service that can be provided digitally through internet banking or mobile banking can be provided in the DBU.

Any product or service which a bank is not permitted to offer as per the provisions of Banking Regulation Act 1949, as amended from time to time, cannot be offered by the DBU.

RBI said SCBs with past digital banking experience are permitted to open DBUs in Tier 1 to Tier 6 centres, unless otherwise specifically restricted, without having the need to take permission from Reserve Bank of India in each case.

For the distribution layer of digital banking, each bank can choose suitable smart equipment, such as Interactive Teller Machines, Interactive Bankers, Service Terminals, Teller and Cash Recyclers, Interactive Digital Walls, Document uploading, self -service card issuance devices, Video KYC Apparatus, secured and connected environment for use of own device for digital banking, Video Call / Conferencing facilities, to set up an DBU.

These facilities can be in-sourced or outsourced while complying with relevant regulatory guidelines.

Banks are free to adopt an in-sourced or out-sourced model for operations of the Digital Banking Segment including DBUs.

Digital Banking Segment is a sub-segment of the existing ‘Retail Banking’ Segment which will now be sub-divided in to (i) Digital Banking and (ii) Other Retail Banking. 

“...The operational governance and administrative structure of the DBUs will be aligned with that of the Digital Banking Segment of the bank,” the guidelines said.

In order to accelerate digital banking initiatives, each DBU will be headed by a sufficiently senior and experienced executive of the bank, preferably Scale III (Senor Manager) 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.

There should be adequate digital mechanism to offer real time assistance and redress customer grievances arising from business and services offered by the DBUs directly or through Business Facilitators / Correspondents.