Loading...

Digital Banking Unit Norms – All That You Need To Know

The Reserve Bank of India has recently released digital banking units (DBU) establishment norms. This comes after the finance minister announced the objective of establishing 75 DBUs in 75 districts to observe 75 years of independence of the nation. In budget 2022-23, she recognizes this drive as ‘Azadi ka Amrit Mahotsav.’

What is a Digital Banking Unit (DBU)?

DBUs are specialized fixed point business units of a bank that consists of minimal digital infrastructure needed for delivering digital banking products and services in addition to servicing already existing financial products and services online. This is usually done in both self-service and assisted mode to facilitate customers with easy access, convenience, and flexibility, all resulting in an enhanced user experience. DBUs provide users with banking services in a cost-effective, secured way throughout the year, conducting operations 24×7.

Key guidelines to consider while setting up Digital Banking Units

  • Permission at the time of establishing DBU 

All scheduled commercial banks (excluding RRBs, PBs, and LABs) having past digital banking experience are allowed to open DBUs in Tier 1 to Tier 6 centres. They are not required to take permission from the RBI, unless specifically restricted.

Each of these newly set up DBUs will be considered as Banking Outlets, as stated in Rationalisation of Branch Authorisation Policy – Revision of Guidelines (RBI’s circular). While the opening of BOs, the centre known to perform business operations of the hub will be treated as an official registered place, instead of its physical location.

  • Infrastructure & Resource Requirements

Each banking unit is required to be housed separately, with distinct entry and exit provisions. They are asked to follow different formats and designs as compared to existing BOs. This is to meet digital banking customers’ needs of utmost convenience and frictionless experience.

To set up DBU, each bank has to choose smart equipment (insourced/outsourced) as a part of the front-end or distribution layer. This could include Interactive Teller Machines, Interactive Bankers, Service Terminals, Document uploading, self-service card issuance devices, Video KYC Apparatus, and more. For the back-end, all the core banking services can be shared with the incumbent systems with logical separation. 

Regarding resources, banks can adopt digital native technologies to offer greater mobility and scalability in developing digital environments. If the bank has integrated third-party API into its systems, it should be tested by a trusted risk evaluation and verification system to mitigate risks related to financial fraud. 

  • Cybersecurity

DBUs are recommended to embed appropriate security systems into their infrastructure to safeguard against severe data breaches.

  • Products and Services

Each unit should provide minimum online banking products and services. All these products and services must be listed on both liabilities and assets side of the balance sheet of the digital banking segment. This further includes digitally value-added services (remote account opening, online loan application, instant bulk payments, automatic bill payments, etc.) and conventional products (lending and borrowing). 

On the liabilities part, UBOs are mandated to offer services like account opening including current, savings, fixed, and recurring deposits along with the digital kit for customers and merchants such as mobile banking, internet banking, issuing a debit card, credit card, BHIM Aadhar and more. 

As far as the asset side is concerned, the units must offer services like cash withdrawal, and deposit only through ATM and cash deposit machines. In any case, the system should not accept or disburse physical cash across counters, facilitate passbook printing, fund transfers (NEFT, IMPS), update the KYC, and other similar details.

Moreover, DBUs are expected to make a shift from standard products to structured, customized ones by adapting their hybrid, highly interactive features. RBI has introduced a list of products/services that can be catered by DBUs. Apart from this list, banks can also offer other digital banking services to meet specific customer/geographical location demands. In simple terms, any product or service that can be offered digitally via internet banking or mobile banking can be provided in the DBU.

  • Educating Digital Banking Customers 

Remote customers may not be familiar with the tech-advanced tools and digital processes. DBUs must conduct digital onboarding and opt for user-friendly tools, and techniques to lend them hands-on experience with digital processes while integrating digital banking services.

“This effort has to be clearly translated to incremental digital penetration of the financial services a DBU is catering to and will have to be monitored. The district where the DBU is located will be the catchment area for the purpose,” reports the RBI. 

  • Digital Business Facilitator

To expand the virtual footprint of DBUs, banks will be given the option to engage digital business facilitators in accordance with the regulatory needs.

  • Customer Grievances

DBUs must set up an effective digital grievance redressal mechanism for addressing customer issues in real-time. The grievances could be related to banking products or services provided by DBUs.

  • Reporting

As far as reporting is concerned, banks will have to report the digital banking segment as a sub-segment within the existing retail banking segment, as mentioned by RBI. It is also directed that the digital banking products/services not covered under the retail banking segment need not be reported. The monthly performance update must be reported to the Department of Supervision, RBI, merged all together in the bank’s Annual Report. The report must be outlined in a pre-defined format. 

  • Roles & Responsibilities of Board of Directors  

Considering the prime objective of DBUs, which is an expansion of digital financial services along with extensive financial inclusion, the board should ensure provisions of the system completely covers the guidelines. 

The Board or a Committee of the Board is responsible to review the DBU’s performance and progress. The review should analyze key business indicators and the risks associated with them. 

THE BOTTOMLINE

DBUs can be a game changing means for speedy transformation of digital economy. Pirimid Fintech helps banks, NBFCs and Fintechs in digitizing their end to end lending journeys or improvising their existing journeys with its sophisticated solutions such as E2E User Apps, OCEN, Account Aggregator, Underwriting, Early Warning System, etc. This helps them in to strategically grow their loan book size with Pirimid’s customizable solutions.

 

Leave a Reply

Your email address will not be published.

Recent Insights

Popular Tags

Get Email Alerts When We Update Our Insights.