What Are Online Banking Units, And What Functions Will They Supply, Explained?

What Are Online Banking Units, And What Functions Will They Supply, Explained?
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Nirmala Sitharaman, the Finance Minister, underlined her Budget declaration on Tuesday that 75 digital banking facilities would be established in 75 districts this year. This is to help the government’s digital banking inclusion plan move forward.

What was the news?

“In recent years, digital banking, digital payments, and fintech technologies have evolved rapidly in the country,” the Finance Minister stated in the Budget for 2022-23. The government is constantly promoting these industries to guarantee that the advantages of digital banking reach every corner of the country in a consumer-friendly way. To advance this goal, it is planned that Scheduled Commercial Banks establish 75 Digital Banking Items (DBUs) in 75 districts across the country to commemorate the country’s 75th anniversary of independence.”

What do DBUs stand for?

Following a recommendation from a work team of the Indian Banks Association, the Reserve Bank of India released guidelines for DBUs earlier this month. A digital banking unit is a customized convergence point business unit or hub that houses a particular digital infrastructure for offering digital banking services and products and servicing current financial services in a self-service manner.

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Who will be responsible for putting these DBUs in place?

Unless otherwise specified prohibited, commercial banks (other than regional rural banks, payment banks, and local area banks) with prior digital banking experience can open DBUs in tier 1 to tier 6 hubs without the requirement to obtain RBI clearance in each case.

What will these units’ services entail?

The RBI requires each DBU to provide digital banking goods and services. The digital banking segment’s balance sheet should include such products on both the liabilities and assets sides. Traditional products with digital value-added services will also be considered.

Savings bank accounts under different programmes, current accounts, fixed deposits, and repeated deposit accounts, digital kit for users, internet payments, Online banking, debit cards, credit cards, and mass transit process cards, digital kit for traders, UPI QR code, BHIM Aadhaar, and point of sale devices are among the services available (PoS).

Making applications for specified retail, MSME, or schematic loans and onboarding consumers are examples of other services. This might also encompass end-to-end digital loan processing, from application to disbursement, and designated government-sponsored programmes covered by the national site.

What strategies will these DBUs employ to compete with fintech?

Fintechs that operate as neobanks currently provide digital banking services, but only with non-banking financial company (NBFCs). Jupiter, Fi Money, Niyo, and Razorpay X are some of the neobanks operating in India.

Neobanks, or digital banks, outperform traditional banks with online and mobile banking services in product technology and creative solutions. Some in the industry have dubbed these digital banks “glorified digital distribution firms” because of their existing partnership with NBFCs or planned banks to handle the real banking part.

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