1. Evolution of Digital Banking in India

India’s banking landscape has undergone a profound transformation from traditional, branch-centric operations to a predominantly digital ecosystem. This shift has been driven by technological progress, regulatory support, government initiatives, and changing customer expectations, making banking more accessible, efficient, and inclusive.

Early Technology Adoption: 1980s–1990s

The digital journey of Indian banking began in the 1980s and 1990s with the adoption of basic information technology. Banks introduced standalone computers, computerized cheque processing, and systems such as MICR to speed up cheque clearing. Electronic Fund Transfer (EFT) mechanisms improved settlement efficiency. These developments laid the technological foundation for future digital banking initiatives.

Introduction of Online Banking: Late 1990s

In the mid-to-late 1990s, Indian banks began offering online banking services. Early online banking was limited in scope, typically allowing balance enquiries and simple fund transfers. Although basic, these services familiarized customers with the concept of remote banking and marked the transition from purely physical banking channels.

Expansion of Digital Payments and Core Banking: Early 2000s

During the early 2000s, banks strengthened their core banking systems and expanded digital payment infrastructure. The introduction of NEFT enabled electronic fund transfers on a national scale, while the growing network of ATMs and the use of debit and credit cards supported cashless transactions. In 2010, IMPS enabled real-time fund transfers, significantly enhancing convenience and speed.

Government Push and Financial Inclusion: 2014–2016

A major turning point came with strong government intervention. The launch of the Pradhan Mantri Jan-Dhan Yojana in 2014 brought millions of unbanked individuals into the formal banking system through zero-balance accounts. The demonetisation exercise in 2016 further accelerated digital adoption by sharply reducing cash usage. In the same year, the introduction of the Unified Payments Interface (UPI) revolutionised digital payments by enabling instant, round-the-clock mobile-based transfers between bank accounts.

Mobile Banking, Fintech, and Platform-Based Growth: 2017 Onwards

From 2017, digital banking entered a platform-driven phase. Banks launched integrated mobile and internet banking platforms, offering services such as bill payments, account management, online deposits, and loan applications. Fintech startups emerged as key innovators, providing digital wallets, app-based payments, online lending, and robo-advisory services. Neo-banks and fintech–bank partnerships helped extend financial services to underserved and unbanked populations.

Impact of the COVID-19 Pandemic

The COVID-19 pandemic in 2020 acted as a powerful catalyst for digital banking. Lockdowns and social distancing sharply reduced branch visits, making internet and mobile banking essential for daily transactions. This period led to a permanent shift in customer behaviour toward digital-first banking and contactless payments.

Role of Regulation and Security Framework

The Reserve Bank of India played a critical role in enabling safe and scalable digital banking. It strengthened payment infrastructure, mandated two-factor authentication for electronic transactions, and adapted KYC norms to allow digital onboarding through Aadhaar-based e-KYC. These measures enhanced customer trust, data security, and ease of access.

Digital Banking in the 2020s

By the mid-2020s, digital payments became the dominant mode of transactions in India, accounting for nearly all transaction volumes. Continuous improvements in digital KYC, online onboarding, and payment systems further consolidated India’s position as a global leader in digital payments.

2. 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 ...

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