Eight years ago, the country’s largest bank, State Bank of India (SBI), came up with the idea of digital-only branches. These branches operated with minimum human intervention, allowing customers to use the self-assisted mode for printing their pass books, opening accounts, availing loans, etc. They also enabled a customer to talk to a remote banker through a video link. It was an innovative idea, but the initiative focussed on the big cities at that time.
This February, the government picked up the idea and made it a national goal to support financial inclusion, when Finance Minister Nirmala Sitharaman announced the establishment of 75 digital banking units (DBUs) across 75 districts in Budget 2022-23. While the government was a catalyst, banking regulator Reserve Bank of India (RBI), the Indian Banks Association and commercial banks selected the districts. For instance, ICICI Bank has opened a DBU in Kohima, Nagaland and Kotak Bank has opened one in Mehsana, Gujarat.
Currently, these DBUs—spread across districts like Jhansi (in UP), Thrissur (Kerala), Bongaigaon (Assam), Gomati (Tripura), and Aizawl (Mizoram)—provide banking services like cash withdrawal, deposit, fund transfer, investment, insurance, etc. These DBUs are open 24x7 for use in self-service mode. During daytime, bank officials are present to guide customers. “DBU is a big step in the direction of ease of living for the common citizens,” declared Prime Minister Narendra Modi, while kicking off the DBU operations.
The establishment of DBUs is another step towards greater financial inclusion following the government’s drive in early 2014, after which banks opened 400 million new accounts called Jan Dhan. Similarly, the setting up of differentiated banking platforms like payments banks and small finance banks was yet another initiative to create an institutional framework to help the urban poor and rural folk bank. “DBUs will enable customers who do not have a PC, laptop, or smartphone to access banking services. They can do it digitally,” said Sitharaman on the day of the launch. For context, there are 72,000 branches (58 per cent of all branches) in rural and semi-urban areas where most of the DBUs have been created. “These units provide digital facilities with a human presence. The human element is essential, especially in remote locations,” says Arvind Vohra, Country Head of Retail Branch Banking at HDFC Bank.
Clearly, the setting up of DBUs has created an additional digital layer in the smaller geographies. “DBUs will provide end-to-end digital processing of small-ticket retail and MSME loans, starting from online applications to disbursals,” said RBI Governor Shaktikanta Das at the virtual launch of DBUs. Some experts, however, argue that DBUs are not necessary at a time when options like net banking, mobile banking, kiosks, UPI, etc. are available. SBI, too, switched to YONO, a digital banking platform, rather than expanding its own digital branch network.
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FAQs
The Hon'ble Prime Minister, Shri Narendra Modi, dedicated 75 Digital Banking Units (DBU) across 75 districts to the nation via NIC video conferencing on November 16, 2022. He stated that the Digital Banking Units (DBU) will increase financial inclusion and enhance the banking experience for citizens.
Why did digital banking start? ›
Online banking portals were developed due to increased internet use in the 1990s and 2000s. Banks started creating online portals to enable consumers to see account balances, transfer money and pay bills from their home computers. Online banking quickly became a preferred option for many people due to its convenience.
What is the most important factor for a digital bank to succeed? ›
Not only do they need to keep up with the higher-than-ever customers' expectations but to be highly agile to survive and thrive in this evolving market. Scalability - the ability of digital banks to expand the services and customer base without losing performance - is the ultimate goal for most digital banks.
How many digital banks are there in India? ›
Prime Minister Shri Narendra Modi dedicated 75 Digital Banking Units (DBUs) to the service of the nation on October 16, 2022. This was stated by the Union Minister of State for Finance, Dr Bhagwat Kisanrao Karad, in a written reply to a question in Lok Sabha today.
What is 75 DBU in India? ›
Why in News? Recently, the Prime Minister of India has dedicated 75 Digital Banking Units (DBU) across 75 districts to the nation. As part of the Union budget speech for 2022-23, the Finance Minister announced setting up the 75 DBUs in 75 districts to commemorate our country's 75 years of independence.
What is digital banking unit in India? ›
Digital Banking Unit (DBU) is a specialized fixed point business unit / hub having certain minimum digital infrastructure for delivering digital banking products & services as well as servicing existing financial products & services digitally, in both self-service and assisted mode.
What is the purpose of digital banking? ›
Digital banking systems remove a lot of work from banks by automating the processes associated with daily financial transactions. Digitization reduces the number of steps and people involved in transactions, reducing the risk of costly financial errors.
What is the risk of digital banking? ›
It includes cybersecurity risks, the risk of non-compliance with data protection regulations, and the risk of legacy systems. While banks develop thorough plans for dealing with financial risks, they may not be aware of technological risks. Banks might face several challenges when they try to mitigate technology risks.
Why do we need digital banking in India? ›
Digital Banking gives you the luxury of freely accessing and performing all traditional banking activities 24*7 without having to personally go to a bank branch to get your work done. Digital Banking can be done either through a laptop, tablet or your mobile phone. This is what is Digital Banking in India all about.
Is digital banking good or bad? ›
The lack of overhead gives internet banks advantages over traditional banks, including fewer or lower fees and accounts with higher APYs. Internet banks lack personal relationships, no proprietary ATMs, and more limited services.
Digital technology is transforming the banking industry by improving customer experience, increasing operational efficiency, and reducing costs. Artificial intelligence, blockchain, mobile banking, cybersecurity, big data analytics, and augmented reality are among the key trends shaping the future of banking.
How is digital banking changing the world? ›
Digital Platforms: Convenience at Your Fingertips
Thanks to robust digital platforms, banking is now seamless and accessible 24/7. From checking balances and paying bills to transferring funds and applying for loans, everything can be done on your mobile app or online. This shift provides unparalleled convenience.
Is digital banking safe in India? ›
The Reserve Bank of India (RBI) gives the highest importance to the security controls around the digital payment systems in India. There is a lot of emphasis on the safety and security of digital transactions for their users.
Who started digital banking in India? ›
When did digital banking start in India? Digital banking started taking shape in India during the late 1990s. ICICI bank was the first one to introduce this service to their retail customers. However, it gained popularity in 1999 with reduced internet charges and increased awareness.
What is the bad bank concept? ›
A bad bank is a financial institution whose function is to acquire non-performing assets (NPAs) from other banks and financial institutions. Acquiring the NPAs of other banks provides a safety net to them by removing bad loans from their balance sheets and enabling them to lend without constraints.
How many digital payment systems are there in India? ›
Types of Digital Payments In India
After the launch of Cashless India,(which aims to promote a cashless economy), we currently have ten digital payment methods available in India. Some digital payment methods have been used for over a decade, some have recently gained popularity, while others are relatively new.
Which bank will introduce a digital rupee in India? ›
The Phase-1 of pilot project for e₹-R will start from 1 December 2022 in Mumbai, New Delhi, Bengaluru, and Bhubaneswar under State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank.
How many digital payments are there in India? ›
We have seen retail digital payments in India growing from 162 crore transactions in FY2012-13 to over 14,726 crore transactions in 2023-24 (till February 2024) i.e., approximately 90-fold increase over 12 years. Today, India accounts for nearly 46% of the world's digital transactions (as per 2022 data) 1.
How many digital payments per day in India? ›
UPI's share in digital payments reached nearly 80% in 2023 and is the biggest contributor to the growth of digital payments in India. Retail digital payments in India grew significantly, and UPI transactions are expected to cross 100 crore per day.
