RBI releases guidelines on digital banking units

RBI

The Reserve Bank of India (RBI) has released guidelines for banks to set up digital banking units (DBUs). This follows an announcement made in the Union Budget 2022-23 for setting up of 75 DBUs in 75 districts to commemorate the 75 years of independence of our country.

A DBU is a specialised fixed point business unit / hub housing certain minimum digital infrastructure for delivering digital banking products & services. The objective of a DBU is expansion of digital financial services and financial inclusion.

As per the guidelines, scheduled commercial banks with past digital banking experience are permitted to open DBUs in Tier 1 to Tier 6 centres without having the need to take permission from Reserve Bank of India in each case.

The DBUs of the banks will be treated as Banking Outlets, the RBI said, adding each DBU needs to be housed distinctly, with the separate entry and exit provisions. They will be separate from an existing Banking Outlet with formats and designs most appropriate for digital banking users, the central bank said.

Further, banks are free to adopt an in-sourced or out-sourced model for operations of the digital banking segment including DBUs. The outsourced model should specifically comply with the relevant regulatory guidelines on outsourcing, the RBI said.

Also, the establishment of DBUs should be part of the digital banking strategy of the bank, the RBI said.

The operational governance and administrative structure of the DBUs will be aligned with that of the Digital Banking Segment of the bank, it said.

In order to accelerate digital banking initiatives, each DBU will be headed by a sufficiently senior and experienced executive of the bank, preferably Scale III or above for PSBs or equivalent grades for other banks who can be designated as the Chief Operating Officer (COO) of the DBU, the RBI said.

The RBI said in addition to ensuring physical security of the infrastructure of the DBU, adequate safeguards for cyber security of the DBUs will have to be ensured by the banks.

Each DBU 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.

The banks will have the options to engage digital business facilitator / business correspondents in conformance with relevant regulations  to expand the virtual footprint of DBUs, the RBI said.

Further, there should be adequate digital mechanism to offer real time assistance and redress customer grievances arising from business and services offered by the DBUs directly or through Business Facilitators / Correspondents, the central bank said.

The RBI said the board should ensure provisions of regular on-site and off-site monitoring system covering all aspects of the guidelines.

Also, the board or a committee of the board shall review the progress and key performance indicators of digital banking services including that of DBU separately at suitable periodicity, the RBI said.