On Sunday, October 16, Prime Minister Narendra Modi honored the nation by dedicating 75 digital banking facilities, carrying out a promise made by Finance Minister Nirmala Sitharaman in the 2022–23 Union Budget.
The digital banking systems will "advance financial inclusion" and "substantially improve the banking experience for the citizens.
It is planned to establish 75 Digital Banking Units (DBUs) by Scheduled Commercial Banks in 75 districts across the nation to commemorate independence’s 75th anniversary.
What Dbus Are These?
Following the publication of a working group's report by the Indian Banks Association, the Reserve Bank of India (RBI) published the guidelines for DBUs in April of this year (IBA). A digital banking unit is a specialized fixed point business unit or hub that is equipped with the bare minimum of digital infrastructure for the delivery of digital banking products and services as well as the self-service digital maintenance of current financial products and services at any time.
Who Is Going To Install These Dbus?
Unless otherwise prohibited, commercial banks with prior expertise in digital banking are allowed to open DBUs in tier 1 to tier 6 centers without needing to seek RBI approval in each instance (other than regional rural banks, payment banks, and local area banks).
What Services Will These Units Offer?
Each DBU is required by the RBI to provide a minimum set of digital banking goods and services. Such products ought to appear on the digital banking segment's balance sheet on both the liabilities and assets sides. The same would apply to conventional products with digital value-added services. The services include current accounts, fixed deposit and recurring deposit accounts, debit cards, credit cards, public transit system cards, digital kits for customers, mobile banking, internet banking, UPI QR codes, BHIM Aadhaar, and point of sale (PoS).
Making applications and onboarding clients for specified retail, MSME, or schematic loans are further services. This may also entail identifying government-sponsored programs that are covered by the national portal and end-to-end digital processing of such loans, from online application through disbursal.
How Will These Dbus Deal With The Fintech Industry?
Digital banking services are currently provided by fintechs acting as neobanks, but they do so in collaboration with non-banking financial firms (NBFCs). Neobanks that provide services in India include Jupiter, Fi Money, Niyo, and Razorpay X. Neobanks, or digital banks, thrive at product innovation and provide significantly superior digital solutions than traditional banks with online and mobile banking capabilities.
However, others in the industry have labelled these digital banks as "glorified digital distribution firms" due to the agreement they now have with NBFCs or scheduled banks to perform the actual banking part.