INTRODUCTION
Digital Banking alludes to present and future electronic financial administrations provided by an authorized bank for various monetary transactions through electronic gadgets, which include a critical degree of online interaction and cross-institutional assistance abilities running under upgraded specialized design and separated plan of action or methodology.
A Digital Banking Unit (hereinafter referred to as “DBU”) is a specialised fixed point business unit or hub that houses specific basic digital infrastructure for offering digital banking products and services and servicing current financial products and services in self-service mode at any time.
The Reserve Bank of India (hereinafter abbreviated as “RBI”) has formalized a mechanism to empower banks to set up DBUs for giving a large portion of the administrations through computerized mode vide notification bearing no. RBI/2022-23/19 dated 07.04.2022.
Finance Minister Nirmala Sitaraman in her budget speech of 2022-23 announced the setting up of 75 DBUs in 75 regions to honor 75 years of Indian Independence and the project shall be known as “Azadi ka Amrit Mahotsav”. Since money intermediation has become a reality, advanced banking has shown quick progress.
This progress prompts expectation in the cutting edge technologies when seen along with the possibilities of varied utilization of man-made brainpower such as Artificial Intelligence (“AI”), Edge Machine Learning (“ML”) and Deep Learning (“DL”), Data Analytic instruments, upgrades in advanced financial items through more prominent utilization of intelligent robots, chatbots and self-administration gadgets can be investigated to work on the experience of technically knowledgeable customers.
THE CONCEPT AND SCOPE
To qualify as a DBU, a financial outlet should have the following:
- Options to make applications for and on-boarding of clients for retail
- MSME or schematic credits and
- Government-supported plans are covered under the National Portal.
The DBU Rules list 7 explicit administrations, including cash withdrawal and store through and money store machines (like the ATM), passbook printing administrations, and web banking booths. However, any administration that a bank cannot offer will not be presented by the DBU. Banks should set up sufficient advanced systems to offer continuous help and review client complaints emerging from business and administrations presented by the DBUs either personally or through business reporters.
Banks can decide to involve front-end hardware in a DBU that is either in-obtained or re-evaluated. The back-end, including the center financial framework and other administrative center-related data frameworks, can be imparted to that of the occupant frameworks with appropriate detachment. Banks are allowed to take on an in-obtained or re-evaluated model for activities of the computerized financial portion including DBUs.
The foundation of DBUs is essential for the computerized financial methodology of the bank. The functional administration and authoritative design of the DBUs will be lined up with that of the computerized financial section of the Bank.
Banks should report the computerized financial section as a sub-fragment inside the current retail banking portion. Execution refreshes concerning DBUs should be outfitted in a pre-characterized detailing design.
ROLE OF DIGITAL BANKING UNITS
To extend the Digital Banking system and monetary incorporation, the RBI has allowed Scheduled Commercial Banks (“SCBs”) with prior experience in online banking to open DBUs on Tier 1 to Tier 6 bases, mostly without prior permission.
A DBU is a fixed point specialty unit or center lodging the basic digital facilities in order to produce digital banking services as well as overhauling existing monetary items and administrations carefully, in both self-administration and assisting mode, throughout the year.
The fact that the foundation of DBUs is important for the computerized financial system of the bank has often been emphasized as the DBUs shall be treated as Banking Outlets (BOs). Each DBU must be housed particularly, with the different sections and leave arrangements. They will be discrete from a current BO with configurations and plans generally suitable for advanced financial clients.
Each DBU is expected to offer at least the basic financial services and administrations, per the rules, in a computerized manner. DBUs bring various product liabilities and administrations, for example, account opening, computerized units for clients, and advanced packs for vendors (UPI QR code, BHIM Aadhaar, POS, etc.)
On the computerized administrations front, DBUs need to permit cash withdrawal and money store just through ATM and Cash Deposit Machines individually; passbook printing/articulation age; web banking booth; move of assets; updation of KYC/other individual subtleties.
As far as the resources are concerned, DBU needs to empower making applications for and on-boarding of clients for recognized retail, MSME, or schematic credits; and distinguished Government supported plans which are covered under the National Portal of MSME registration.
Brilliant hardware like Interactive Teller Machines, Interactive Bankers, Service Terminals, Teller and Cash Recyclers, Interactive Digital Walls, Document transferring, self – administration card issuance gadgets, Video KYC Apparatus, etc. come in handy for the distribution of the computerized banking.
These can be obtained while following pertinent administrative rules. Banks are allowed to take on an in-obtained or out-obtained model for activities of the Digital Banking Segment including DBUs.
DIGITAL BANKING UNITS Vis-à-Vis FINTECH SECTOR
The foremost concern for the Citizens shall arise on the mechanism on which DBUs shall create a place in the rapidly growing FinTech space. DBUs are different from Neo-banks as the latter is generally associated with Non-Banking Financial Companies (NBFCs) which help them offer digital banking.
Neo-banks or digital banks thrive in product innovation and offer considerably superior digital solutions than traditional banks with online and mobile banking services. Some in the industry have labeled these digital banks as “glorified digital distribution firms” because of their existing partnership with NBFCs or scheduled banks to conduct the actual banking part.
Moreover, Advanced Banking Segment is a sub-portion of the current ‘Retail Banking’ Segment which will presently be sub-partitioned into:
- Digital Banking
- Other Retail Banking.
To speed up advanced financial drives, each DBU will be going by an adequately senior and experienced leader of the bank, ideally, Scale III (Senior Manager) or above for public area banks or comparable grades for different banks who can be assigned as the Chief Operating Officer (COO) of the DBU.
There ought to be a satisfactory computerized component to offer continuous help and change client complaints emerging from business and administrations presented by the DBUs straightforwardly or through Business Facilitators/Correspondents.
PRODUCTS AND SERVICES OFFERED
1. Liability Products and Administrations offered:
- Account Opening: Saving Bank account under different plans, Current record, Fixed store, and Recurring store account;
- Computerized Kit for clients: Mobile Banking, Internet Banking, Debit Card, Credit card, and mass travel framework cards;
- Digital Kit for Merchants: UPI QR code, BHIM Aadhaar, POS, and so forth.
2. Asset Products and Administrations:
- Making applications for and on-boarding of clients for distinguished retail, MSME, or schematic credits. This may likewise incorporate finish to end computerized handling of such credits, beginning from online application to disbursal;
- Distinguished Government supported plans which are covered under the National Entryway.
3. Digital Services:
- Cash withdrawal and Cash Deposit just through ATM and Cash Store Machines separately no actual money acknowledgment/disbursal across counters;
- Passbook printing/Statement Generation;
- Internet Banking Kiosk which may additionally incorporate offices to give all/greater part of administrations accessible on web banking counting indent and issuance/handling of CheckBook solicitation, receipt and on the web handling of different standing guidelines of clients;
- Move of assets (NEFT/IMPS support);
- Updating KYC/other individual subtleties, and so forth;
- Lodging of complaint carefully and affirmation thereof and furthermore following of goal status; (v) Account Opening Kiosk;
- Kiosk with e-KYC/Video KYC;
- Digital onboarding of clients for plans like Atal Pension Yojana (APY); Insurance onboarding for Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) and Pradhan Mantri Suraksha Bima Yojana (PMSBY).
AMLEGALS REMARKS
DBUs are not the concept that has been newly introduced, in fact, DBU’s are used since 2014-15 in markets such as Hong Kong, Singapore, Malaysia, China, the United Kingdom (UK), and the United States of America. In the UK, regulators have recognised the Digital Banking business model by issuing banking licenses to banks offering ‘digital-first’ or ‘digital-only’ propositions within existing regulations and without creating specialist regimes. In Singapore, Hong Kong, and Malaysia, however, there are special digital bank regulatory regimes. India is yet to place a finger on what works best for it and there may be many rounds of trial and error before we can conclude the result.
As per the experts, the limits of DBU consist low level of public awareness and web availability in urban areas. Further, difficulties, for example, network protection, information security, and phishing should be settled assuming that DBUs are to arrive at their full capacity.
-Team AMLEGALS assisted by Ms. Amrita Ghosh (Intern)
For any queries or feedback, please feel free to get in touch with siddharth.kakka@amlegals.com or prarthana@amlegals.com
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