What are Digital Banking Units?

Upgrade your UPSC CSE preparation with our daily dose of Current Affairs wherein we talk about topics that make news at national and international level.

In today's edition, we will talk about Digital banking units, what are they and will they do. Its relevance to the UPSC CSE syllabus is mentioned below.

For Prelims: Digital Banking Units (DBUs), Reserve Bank of India (RBI), Indian Banks Association (IBA), Non-banking financial companies (NBFCs).

For Mains: Aim of DBUs, Significance of DBUs, Who will set up these DBUs, Services Provided by these units, Digitally Banking Units (DBUs) and fintechs.

Context

To further financial inclusion and significantly improve banking experience for the citizens the Indian Prime Minister dedicated 75 digital banking units to the nation, as announced in the 2022-23 Union Budget.

Probable Question

75 Digital Banking Units (DBU) aims to transform the approach by bringing the bank to the people. Comment

About the Digital Banking Units (DBUs)

• A digital banking unit is a specialised fixed point business unit or hub, housing a certain minimum digital infrastructure for delivering digital banking products and services as well as servicing existing financial products and services digitally in self-service mode at any time.
• It was announced by the Reserve Bank of India (RBI), the guidelines for DBUs, following the report of a working group of the Indian Banks Association (IBA). 
• Aim of DBUs: 
  • To provide maximum services with minimum infrastructure, and all of this will happen digitally without involving any paperwork.
  • To empower the common citizen and make them powerful, and as a result, policies were made keeping in mind the last person and the entire government moving in the direction of their welfare. 
  • The two areas on which the government worked simultaneously are:
    • Reforming, strengthening, and making the banking system transparent.
    • Financial inclusion.

Also read our yesterday's edition of Current Affairs on Dilip Mahalanabis demise.

Significance of DBUs

• The 75 Digital Banking Units (DBU) will further financial inclusion. 
• It will also enhance banking experience for citizens. 
• DBU is a crucial steps in the direction of Ease of Living for the common citizens. 
• It will also simplify the banking procedure.
• It will also providing a robust and secure banking system. 
• People living in small towns and villages will find benefits like transferring money to availing loans. 
• Digital Banking Units are another big step in that direction which is going on in the country to make the life of common man of India easier.

Who will set up these DBUs?

• Commercial banks (other than regional rural banks, payment banks and local area banks) with past digital banking experience.
• They are permitted to open DBUs in tier 1 to tier 6 centres, unless otherwise specifically restricted.
• They can set up these DBUs without having the need to take permission from the RBI in each case.

Services Provided by these Units

• As per the RBI, each DBU must offer certain minimum digital banking products and services. 
• Digital banking products and services 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.
• The services under this include:
  • Saving bank accounts under various schemes, 
  • Current accounts, fixed deposit and recurring deposit accounts, 
  • Digital kits for customers, mobile banking, Internet banking, debit cards, credit cards, and mass transit system cardss, 
  • Digital kits for merchants, UPI QR codes, BHIM Aadhaar and point of sale (PoS).
• Other services: 
  • Making applications for and onboarding customers for identified retail, 
  • MSME or schematic loans. 
  • End-to-end digital processing of such loans, starting from online application to disbursal and identified government-sponsored schemes.

Digitally Banking Units (DBUs) and Fintechs

• Currently, fintechs operating as neobanks offer digital banking services, but in partnership with non-banking financial companies (NBFCs). 
• Some of the neobanks offering services in India are Jupiter, Fi Money, Niyo, Razorpay X.
• Neobanks or digital banks excel at product innovation and offer far better digital solutions as compared to conventional banks with online and mobile banking facilities. 
• They have currently with NBFCs or scheduled banks to conduct the actual banking part, some in the industry have pegged these digital banks as “glorified digital distribution companies”.

News Source: The Indian Express

https://indianexpress.com/article/explained/explained-economics/explained-digital-banking-units-prime-minister-narendra-modi-8211607/

https://pib.gov.in/PressReleasePage.aspx?PRID=1868226

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