75 Digital Banking Units In 75 Cities: RBI Issues Guidelines For Digital Banking Units (Everything You Need To Know)

Following the announcement made in the Union Budget 2022-23 for setting up of 75 DBUs in 75 districts to commemorate the 75 years of independence of our country, guidelines to set up digital banking units (DBUs) have been set up by the Reserve Bank of India (RBI) for banks.

What is a DBU?

Introduced with a prime objective of expansion of digital financial services and financial inclusion, a Digital Banking Unit (DBU) is a specialised fixed point business unit / hub housing certain minimum digital infrastructure for delivering digital banking products & services.

RBI Guidelines

As per the guidelines, scheduled commercial banks with past digital banking experience are permitted to open DBUs in Tier 1 to Tier 6 centres without having the need to take permission from Reserve Bank of India in each case.

The RBI said that the DBUs of the banks will be treated as Banking Outlets and that each one needs to be housed distinctly with the separate entry and exit provisions. The central bank said that they will be separate from an existing Banking Outlet with formats and designs most appropriate for digital banking users.

Guidelines said that for the operations of the digital banking segment including DBUs, banks are free to adopt an in-sourced or out-sourced model. RBI said that the outsourced model should specifically comply with the relevant regulatory guidelines on outsourcing.

The RBI added that the establishment of DBUs should be part of the digital banking strategy of the bank.

It said that 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 that each DBU will be headed by a sufficiently senior and experienced executive of the bank, preferably Scale III or above for PSBs or equivalent grades for other banks who can be designated as the Chief Operating Officer (COO) of the DBU in order to accelerate digital banking initiatives.

In addition to ensuring physical security of the infrastructure of the DBU, RBI said that adequate safeguards for cyber security of the DBUs will have to be ensured by the banks.

The RBI added that 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

RBI said that “Digitally value-added services to conventional products would also qualify as such. 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”.

The RBI said that the bank will have the options to engage digital business facilitator / business correspondents in conformance with relevant regulations to expand the virtual footprint of DBUs

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

Covering all the aspects of the guidelines, the RBI said the board should ensure provisions of regular on-site and off-site monitoring system.

The RBI said that the board or a committee of the board shall review the progress and key performance indicators of digital banking services including that of DBU separately at suitable periodicity.