RBI’s GUIDELINES ON DIGITAL BANKING UNITS.
Scheduled commercial banks with prior digital banking expertise are permitted to open DBUs in Tier 1 to Tier 6 centres without the need to seek permission from the Reserve Bank of India in each case, according to the guidelines.
The Reserve Bank of India (RBI) issued instructions for banks to establish digital banking divisions on April 7. (DBUs). This comes after the Union Budget 2022-23 announced the establishment of 75 DBUs in 75 districts to honor our country’s 75th anniversary of independence.
A DBU is a specialized fixed point business unit or hub that houses the necessary digital infrastructure to supply digital banking goods and services. A DBU’s goal is to increase digital financial services and financial inclusion.
Scheduled commercial banks with previous digital banking expertise are allowed to open DBUs in Tier 1 to Tier 6 centers without obtaining permission from the Reserve Bank of India in each case, according to the guidelines.
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Bank DBUs will be classified as Banking Outlets, according to the RBI, which also stated that each DBU must be housed separately, with separate entry and exit provisions. According to the central bank, they would be distinct from conventional Banking Outlets, with formats and designs tailored to digital banking consumers.
Furthermore, for activities in the digital banking segment, including DBUs, banks have the option of using an in-sourced or out-sourced strategy. The outsourced model should adhere to the relevant outsourcing regulatory criteria, the RBI said.
The RBI also stated that DBUs should be included in the bank’s digital banking strategy.
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The DBUs would have the same operational governance and administrative structure as the bank’s Digital Banking Segment, according to the statement.
Each DBU shall be led by a suitably senior and experienced bank executive, preferably Scale III or above for PSBs or similar grades for other banks, who will serve as the DBU’s Chief Operating Officer (COO), according to the RBI.
The RBI stated that in addition to guaranteeing the physical security of the DBU’s infrastructure, banks must also ensure suitable safeguards for the DBU’s cyber security.
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Each DBU is required to provide a set of digital banking goods and services. The RBI went on to say that such products should be on both the liabilities and assets side of the digital banking segment’s balance sheet.
“Digitally enhanced services for traditional products would also be considered. By utilizing its hybrid and high-quality interactive capabilities, the DBUs is projected to shift from standard offers to more structured and custom-made products “According to the central bank.
To broaden the virtual footprint of DBUs, banks would be able to engage digital business facilitators/business correspondents in accordance with relevant rules, according to the RBI.
Furthermore, the central bank stated that suitable digital mechanisms should be in place to provide real-time help and remedy customer issues originating from business and services provided by DBUs directly or through Business Facilitators / Correspondents.
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The RBI recommended that the board establish a regular on-site and off-site monitoring system that covers all parts 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 a suitable periodicity, the RBI said.
