New guidelines have been released by the Reserve Bank of India (RBI) to set up digital banking units (DBUs), with the objective of setting up 75 DBUs in 75 districts across the country. A digital banking unit is a specialized fixed point business unit that delivers digital banking products and services. The purpose of a DBU is to expand digital financial services to create financial inclusion in the communities.
According to the guidelines, banks with past digital banking experience are allowed to open DBUs in Tier 1 to Tier 6 cities without taking permission from the Reserve Bank of India. The RBI said that every DBU would be housed distinctly, with each of them having separate entry and exit provisions. Additionally, banks will be given an option to adopt an in-sourced or out-sourced operations model including DBUs.
The outsourced model would predominantly comply with the essential regulatory guidelines on outsourcing. Consequently, the establishment of DBUs would fall under the digital banking strategy of the bank. “The operational governance and administrative structure of the DBUs will be aligned with that of the Digital Banking Segment of the bank,” RBI said.
Initially, each DBU would be supervised by a senior and experienced executive of the bank to ensure smooth operations. Scale III or above for PSBs or equivalent grades for other banks would be designated as the Chief Operating Officer (COO) of the DBU.
In addition to that, the RBI said that to ensure the physical security of the infrastructure of the DBU, relevant steps would be taken to safeguard them from cyber threats. “Each Digital Banking Unit must offer certain minimum digital banking products and services. Such products should be on both liabilities and assets side of the balance sheet of the digital banking segment,” the RBI added.
“Digitally value-added services to conventional products would also qualify as such. The DBUs are expected to migrate to more structured and custom-made products, from standard offerings by use of its hybrid and high-quality interactive capabilities,” the central bank said.
Furthermore, Digital Banking Units will be equipped with an appropriate digital mechanism to offer real-time assistance to the customers and redress their grievances arising from businesses directly, or through Business Facilitators/Correspondents.
The RBI has asked the board to ensure provisions of continuous on-site and off-site monitoring systems. In addition, the board or a committee of the board must review the progress regularly and identify the key performance indicators of digital banking services including DBU’s separately.