Can Digital Banking Units Take Banking Within the Reach Of Common Man?

In a move aimed at strengthening the ideas of ‘financial inclusion,’ Prime Minister (PM) Narendra Modi on Sunday, launched 75 Digital Banking Units (DBUs) across the nation. These units, expected to make banking services more affordable and accessible, are to be made available in 75 districts as a commemoration of 75 years of Indian independence. The idea of DBUs was first floated during the Union Budget 2022, where Finance Minister (FM) Nirmala Sitharaman spoke about the government's plan to enhance the digital banking landscape through DBUs. 

“In recent years, digital banking, digital payments and fintech (financial technology) innovations have grown at a rapid pace in the country. The government is continuously encouraging these sectors to ensure that the benefits of digital banking reach every nook and corner of the country in a consumer-friendly manner," said FM Sitharaman at the Budget 2022.

Following the success of the Pradhan Mantri Jan Dan Yojana and Unified Payments Interface (UPI) services, DBUs are touted to be the next big step in improving financial accessibility among the Indian population, especially in rural areas. The setting up of DBUs are to be managed by Scheduled Commercial Banks (SCBs) which would include 11 public sector banks, 12 private sector banks and one Small Finance Bank. 

What are DBUs? 

DBUs, like regular banks, will be brick-and-mortar outlets that will cater to several digital banking needs. According to the Reserve Bank of India (RBI’s) guidelines on this, a DBU will be a specialised fixed point business hub with the required infrastructure to provide digital banking products and services. 

According to these guidelines, SCBs with past digital banking experience will be permitted to set up DBUs in tier 1 to tier 6 cities. These DBUs will be expected to provide digital banking products both on the assets and liabilities side of the balance sheet. Under one roof, people will be able to get a variety of services like opening of savings accounts, checking balance, printing passbooks, transferring funds, investing in fixed deposits, applying for loans, credit/debit cards, paying bills/taxes etc.  

What do they bring to the table? 

While launching the DBUs via a video conference, PM Modi stated that DBUs will be able to provide maximum digital banking services through minimum infrastructure. For example, ICICI Bank, one of the SCBs setting up DBUs, will have two distinct features at the units they set up – a Self-Service Zone and a Digital Assistance Zone (DAZ). The Self-Service Zone will provide services like printing of pass book, and depositing of cheque via a Multi-Functional Kiosk in addition to ATM and cash deposit machines. Chatbots will be utilised to assist customers in this section. The DAZ will have more of a human touch wherein bank officials will assist the customers in processes like setting up of new accounts.  

By taking digital banking to remote places of the country, DBUs can be a way to make banking more cost-effective for a large section of the Indian population. In the past, the inaccessibility of banking services have rendered a portion of the population financially illiterate and very dependent on bank officials for the smallest of tasks. Such systems will help the common person in becoming more independent when carrying out major financial decisions. 

Recently, RBI Governor Shaktikanta Das said that the DBUs are expected to augment the top bank’s efforts in promoting financial inclusion by providing all banking services in a paperless, safe and secure environment. This was also mentioned in the PM's address at the video conference where he pointed out that phone banking which was more prevalent in the pre-2014 period was prone to financial crimes whereas the advancements made in the past 8 years have made digital banking more secure and reliable.   

The rapid penetration of UPI has already established that major advancements in the area of fintech can be scaled up in India pretty quickly. Now it remains to be seen whether DBUs can also enjoy the same rate of success when it comes to achieving its goal of improved financial inclusiveness and transparency.