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The Reserve Bank of India (RBI) recently issued recommendations for the country's banks to establish digital banking units (DBUs). In the Union Budget 2022-23, an announcement was made regarding the establishment of 75 DBUs in 75 districts.

Key Points

  • A DBU is a dedicated business unit that holds the bare minimum of digital infrastructure to provide digital banking services and products. 
  • The DBU's goal is to increase financial inclusion and digital financial services.

DBU Policies and Procedures

  • According to the criteria, permission to open DBUs has been granted to schedule commercial banks (SCB) with prior digital banking expertise.
  • They can open DBUs in Tier 1 to Tier 6 centres without the Reserve Bank of India's clearance (RBI).
  • The DBUs that the SCBs will open will be treated as Banking Outlets.
  • Each DBU must be housed separately, with separate exit and entry provisions.
  • The recommendations indicate that the DBUs shall be separate from the existing Banking Outlets, with appropriate formats offered for digital banking customers.
  • The SCBs will also have the option of using an outsourced or in-sourced model for DBU operations.
  • The outsourced model must adhere to the outsourcing regulatory criteria.
  • The DBUs must be established as part of the SCB's digital banking strategy.
  • The administrative and operational structure of the DBUs must be consistent with the SCBs' Digital Banking Segment.
  • The banks must maintain the physical security of the DBU infrastructure and the cyber security of the DBUs.
  • Banks can use business correspondents to increase the DBU's virtual footprint.
  • There should be sufficient systems to address client complaints about the services offered by DBUs.

Director of Digital Banking Units

  • Each DBU must be led by a senior and experienced bank executive who serves as the DBU's Chief Operating Officer (COO).

Services that the Digital Banking Units will offer

  • Each DBU will offer specific digital banking services and products. 
  • The products must appear on both the assets and liabilities sides of the balance sheet of the digital banking sector.

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