Digital Banking Units (DBUs)

With the rapid growth of digital banking, the Government of India and the Reserve Bank of India (RBI) sought ways to extend digital financial services beyond urban areas. To deepen digital penetration and promote inclusion, Digital Banking Units (DBUs) were introduced as a new delivery channel.

In the Union Budget 2022–23, the Finance Minister announced the setting up of 75 DBUs in 75 districts to commemorate 75 years of India’s independence. Subsequently, in April 2022, RBI issued detailed operational guidelines based on recommendations of an Indian Banks’ Association working group.

Concept of Digital Banking Units

A Digital Banking Unit is defined by RBI as a fixed-location outlet equipped with minimum digital infrastructure to provide digital banking products and services. In essence, it functions as a “digital branch.” Customers can physically visit a DBU and conduct banking activities through digital interfaces such as ATMs, kiosks, tablets, and interactive touchscreens, with minimal paperwork and manual intervention.
DBUs combine self-service technology with assisted digital support. While many services are automated, staff are available to guide customers who require help. This hybrid model ensures access for individuals with limited digital literacy, no smartphones, or poor internet connectivity, allowing them to use digital banking services in a supervised environment.

RBI Guidelines (April 2022)

Eligibility

All domestic scheduled commercial banks, except Regional Rural Banks, Payments Banks, and Local Area Banks, are eligible to set up DBUs if they have prior digital banking experience. Eligible banks do not require separate RBI approval for each DBU and may establish them in any city tier, from Tier 1 to Tier 6, as part of their digital strategy.

Infrastructure Requirements

Each DBU must be a distinct and clearly identifiable unit with separate entry and exit points. It should have secure, technology-enabled infrastructure and preferably digital-native systems that support paperless processes and API-based integration. Banks may manage technology in-house or outsource it, subject to RBI’s outsourcing norms.

Services Offered

RBI prescribes a minimum bouquet of services for DBUs.

• On the liabilities side, DBUs must facilitate opening of savings and current accounts, fixed and recurring deposits, and onboarding for digital wallets or mobile banking.
• On the assets side, DBUs should enable digital loan applications for retail, small business, and MSME borrowers, including onboarding under identified loan schemes.

DBUs must also provide digital payment services such as issuing or servicing debit and credit cards, generating UPI QR codes, enabling Aadhaar-enabled payments, and providing POS machines. Routine banking services like KYC updates, passbook printing, and cash transactions through ATMs or cash recyclers are also expected to be available through digital modes.

Modes of Operation

DBUs are designed to operate in two modes. The Self-Service Mode offers fully automated services through ATMs, kiosks, and other digital touchpoints. The Digital Assistance Mode provides staff or video-based support to help customers use these services. This structure is intended to gradually familiarize less tech-savvy customers with digital banking.

Operational Governance

Each DBU must be headed by a sufficiently senior official, such as Scale III or above in public sector banks. Banks’ boards are expected to oversee DBU operations through regular reporting and audits. DBUs are to be treated as an integral part of the bank’s delivery channels, with proper risk management, cybersecurity, and compliance oversight. Banks may also use business correspondents or facilitators in line with existing regulations.

Objectives and Significance

The primary objective of DBUs is to expand digital banking access and promote financial inclusion, especially in rural and semi-urban areas. DBUs provide a physical venue where customers without smartphones or reliable internet can still access digital services. They help bridge the digital divide by enabling activities such as paperless loan applications, UPI onboarding, and digital payments.
For banks, DBUs are cost-efficient as they require less physical infrastructure than full branches while offering a wide range of services. Extended operating hours, including 24×7 access to machines, reduce dependence on branch timings and manual processes. DBUs also function as centers for digital financial literacy, where customers can be educated about mobile banking and cyber safety.

DBUs versus Digital-Only Banks

DBUs are not digital-only or neo-banks. They are not separate legal entities but specialized outlets of existing banks. All products, balance sheets, and regulatory requirements remain with the parent bank. RBI has positioned DBUs as an extension of existing banks’ channel architecture rather than as new licensed digital banks.

Current Status and Way Forward

By October 2022, the initiative materialized with the inauguration of 75 DBUs across 75 districts. These units, operated by both public and private sector banks, are now functional. Over time, banks may expand the DBU network further to reach underserved regions. If implemented effectively, DBUs can simplify banking, reduce costs, enhance customer experience, and make digital banking accessible to all sections of society.