RBI unveils guidelines for digital banking units. Here's 10 key points (2024)

These guidelines apply to all domestic scheduled commercial Banks (excluding Regional Rural Banks, Payments Banks, and Local Area Banks).

RBI had set up a committee on DBUs for recommending different aspects of DBU viz., the digital banking unit model, facilities to be offered in DBUs, monitoring of functioning of DBUs, cyber security, and other IT-related aspects, the role of DBU in the spread of digital banking awareness, etc. The guidelines have been finalised based on the recommendations of the Committee.

What are DBUs?

DBUs are specialised fixed point business unit / hub housing 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, to enable customers to have cost effective/ convenient access and enhanced digital experience to/ of such products and services in an efficient, paperless, secured and connected environment with most services being available in self-service mode at any time, all year round.

Here are the guidelines of Establishment of Digital Banking Units (DBUs):

1. Opening of DBUs – General Permission:

All scheduled commercial banks (except RRBs, PBs and LABs) 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 central bank in each case.

These DBUs will be treated as as Banking Outlets (BOs) as defined in RBI's circular on “Rationalisation of Branch Authorisation Policy- Revision of Guidelines."

On opening of f BOs during a financial year, the DBUs will be treated as opened in a centre from where the significant parts of its new business are proposed to be sourced, regardless of its physical location.

2. Infrastructure and Resources:

Each DBU will be housed distinctly, with the separate entry and exit provisions. They will be separate from an existing Banking Outlet with formats and designs most appropriate for digital banking users.

Meanwhile, for front-end or distribution layer of digital banking, each bank would choose suitable smart equipment, such as Interactive Teller Machines, Interactive Bankers, Service Terminals, Teller and Cash Recyclers, Interactive Digital Walls, Document uploading, self -service card issuance devices, Video KYC Apparatus, secured and connected environment for use of own device for digital banking, Video Call / Conferencing facilities, to set up an DBU.

These facilities can be insourced or outsourced while complying with relevant regulatory guidelines.

Whereas for the back-end including the Core Banking System and other back office related information systems for the digital banking products and services can be shared with that of the incumbent systems with logical separation.

Alternatively, banks can adopt more core-independent digital native technologies offering better scalability, flexibility in creating new / reusable digital environments through continuous development / software deployment and interconnectivity specifically for this business segment, based on their digital strategy.

If the bank's digital banking segment uses API layer, then it will connect with external third-party application providers, the same should be tested in an isolated/ test environment before being integrated to bank’s core systems backed by comprehensive risk evaluation and adequate documentation.

Notably, banks are free to adopt an in-sourced or out-sourced model for operations of the digital banking segment including DBUs.

Banks should plan and put in place a remote or in situ assisted mode arrangements in right proportion as the purpose of DBUs is to optimally blend digital infrastructure with ‘human touch’.

Establishment of DBUs should be part of the digital banking strategy of the bank. The operational governance and administrative structure of the DBUs will be aligned with that of the Digital Banking Segment of the bank.

However, to accelerate digital banking initiatives, each DBU will be headed by a sufficiently senior and experienced executive of the bank, preferably Scale III or above for PSBs or equivalent grades for other banks who can be designated as the Chief Operating Officer (COO) of the DBU.

3. Cyber Security:

To ensure physical security of the infrastructure of the DBU, adequate safeguards for cyber security of the DBUs will have to be ensured by the banks.

4. Products and Services:

Each DBU should offer a certain minimum digital banking products and services.

These products should be on both liabilities and assets side of the balance sheet of the digital banking segment. Digitally value-added services to conventional products would also qualify as such.

The DBUs are expected to migrate to more structured and custom made products, from standard offerings by use of its hybrid and high quality interactive capabilities.

RBI has given an illustrative list of minimum bouquet of products / services and self-service fulfilment services that can be offered in the DBU. However, the banks have the freedom to offer any other digital product or service in addition to the minimum bouquet to cater to the specific needs of the service area. Any product or service that can be provided digitally through internet banking or mobile banking can be provided in the DBU.

Also, any product or service which a bank is not permitted to offer as per the provisions of Banking Regulation Act 1949, as amended from time to time, shall not be offered by the DBU.

5. Digital Banking Customer Education:

In addition to onboarding of customers in a fully digital environment, various tools and methods shall be used by DBUs to offer hands-on customer education on safe digital banking products and practices for inducting customers to self-service digital banking services.

RBI directs that this effort has to be clearly translated to incremental digital penetration of the financial services a DBU is catering to and will have to be monitored. The district where the DBU is located will be the catchment area for the purpose.

6. Digital Business Facilitator / Business Correspondent:

Banks to have the to engage digital business facilitator / business correspondents in conformance with relevant regulations to expand the virtual footprint of DBUs.

7. Customer Grievances:

An adequate digital mechanism should be put in place to offer real time assistance and redress customer grievances arising from business and services offered by the DBUs directly or through Business Facilitators / Correspondents.

8. Reporting Requirements:

Banks are directed to report the Digital Banking Segment as a sub-segment within the existing “Retail Banking Segment" as per the Reserve Bank of India (Financial Statements – Presentation and Disclosures) Directions, 2021. It is clarified that the digital banking products / services applicable to segments other than ‘Retail Banking’ need not be reported at this stage.

Banks need to furnish information relating to opening, closure, merger or shifting of DBUs online through Central Information System for Banking Infrastructure (CISBI) portal to Department of Statistics and Information Management (DSIM).

The performance update with respect to DBU needs to furnished in a pre-defined reporting format (being separately issued) to Department of Supervision, RBI on monthly basis and in a consolidated form in Annual Report of the bank.

9. Role of Board of Directors:

Expansion of digital financial services and financial inclusion being overarching objectives of DBUs and in view of the operational flexibility given to banks in this domain, the board should ensure provisions of regular on-site and off-site monitoring system covering all aspects of the guidelines.

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 suitable periodicity. The review should cover both business and risk aspects of the segment.

10: Minimum Products and Services to be offered by DBUs:

Facilities like savings, current, recurring deposits and fixed deposits opening, along with digital kit for customers such as mobile and internet banking, debt card, credit card, mass transit system cards, UPI QR code, BHIM Aadhaar, POS, etc. is offered.

Further, cash withdrawal and cash deposit through ATM and Cash Deposit machines are allowed that means no physical cash is accepted across counters. Facilities like internet banking Kiosk, NEFT, IMPS, updation of KYC, lodging of grievance, account opening Kiosk, digital onboarding of customers for various government schemes (Atal Pension Yojana; Insurance onboarding for Pradhan Mantri Jeevan Jyoti Bima Yojana; and Pradhan Mantri Suraksha Bima Yojana) are also available.

Also, applications for onboarding of customer for identified retail, MSME or schematic loans is also offered by DBUs.

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Published: 07 Apr 2022, 06:00 PM IST