RBI Guidelines on Digital Banking Units

April 9, 2022

The Reserve Bank of India (RBI) has recently released guidelines for the banks of the country to set up digital banking units (DBUs). An announcement regarding the setting up of 75 DBUs in 75 districts was made in the Union Budget 2022-23.

About Digital Banking Units

A DBU is a specialized business unit that houses minimum digital infrastructure for the purpose of delivering digital banking services and products. The DBU’s objective is the expansion of financial inclusion and digital financial services.

Guidelines for DBUs

  • According to the guidelines, permission to open DBUs has been given to scheduled commercial banks (SCB) that have past digital banking experience.
  • They can open DBUs in Tier 1 to Tier 6 centres without taking any permission from the Reserve Bank of India (RBI).
  • The DBUs that will be opened by the SCBs will be treated as Banking Outlets.
  • Each DBU has to be housed distinctly, with separate provisions for exit and entry.
  • The guidelines state that the DBUs must be separate from the existing Banking Outlet with proper formats provided that will be appropriate for digital banking users.
  • The SCBs will also be free to adopt an out-sourced or in-sourced model for the DBU operations.
  • The outsourced model must comply with the regulatory guidelines related to outsourcing.
  • The establishment of the DBUs must be a part of the SCB’s digital banking strategy.
  • The administrative and operational structure of the DBUs must be in line with the Digital Banking Segment of the SCBs.
  • The physical security of the DBU infrastructure, as well as cyber security of the DBUs musty, be ensured by the banks.
  • The banks can employ business correspondents to expand the DBU’s virtual footprint.
  • There should be proper mechanisms to redress the grievances of the customer arising from the services provided by the DBUs.

Head of the Digital Banking Units

Each DBU must be headed by a senior and experienced executive of the bank who can be designated as the DBU’s Chief Operating Officer (COO).

Services that will be provided by the Digital Banking Units

Each DBU will be providing certain digital banking services and products. The products must be on both the assets and liabilities side of the digital banking segment’s balance sheet.

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