Digital banking units (DBUs)

In news: Prime Minister dedicated 75 digital banking units to the nation, taking forward an announcement that was made in the 2022-23 Union Budget.

About DBUs:

• A digital banking unit is a specialised fixed point business unit or hub, housing a certain minimum digital infrastructure for delivering digital banking products and services as well as servicing existing financial products and services digitally in self-service mode at any time.
• Commercial banks (other than regional rural banks, payment banks and local area banks) with past digital banking experience are permitted to open DBUs in tier 1 to tier 6 centres, unless otherwise specifically restricted, without having the need to take permission from the RBI in each case.

Services offered:

• Each DBU must offer certain minimum digital banking products and services such as saving bank accounts, current accounts, fixed deposit, mobile banking, Internet banking, debit cards, credit cards, and mass transit system cards, digital kits for merchants, UPI QR codes, BHIM Aadhaar and point of sale (PoS).
• Other services include Digitally value-added services to conventional products, making applications for and onboarding customers for identified retail, MSME or schematic loans, end-to-end digital processing of such loans.
• Such products should be on both liabilities and assets side of the balance sheet of the digital banking segment.

Significance of DBUs:

• Further financial inclusion
• Significantly improve banking experience for the citizens

What are Neobanks:

• Neobanks offer digital banking services but they do so in partnership with non-banking financial companies (NBFCs) such as Jupiter, Fi Money, Niyo, Razorpay X
• Neobanks or digital banks excel at product innovation and offer far better digital solutions.
• Given their arrangement with NBFCs or scheduled banks, they are pegged as “glorified digital distribution companies”.

Source: Indian Express

Previous Year Question

Q.1) With reference to digital payments, consider the following statements: (2018)

1. BHIM app allows the user to transfer money to anyone with a UPI-enabled bank account.
2. While a chip-pin debit card has four factors of authentication, BHIM app has only two factors of authentication.

Which of the statements given above is/are correct?

1. 1 only
2. 2 only
3. Both 1 and 2
4. Neither 1 nor 2