| Introduction: Contextual introduction. Body: Explain how setting up Digital Banking Units (DBU) is a big step in the direction of Ease of Living for the common citizens and strengthening digital infrastructure. Also write its issues. Conclusion: Write a way forward. |
DBU is a specialized business unit of a bank that houses certain minimum digital banking products and services. Each DBU must offer certain minimum digital banking products and services. The services include savings bank accounts under various schemes, current accounts, fixed deposits and Internet banking, debit and credit cards, UPI etc. Other services include making applications for identified retail, MSME or schematic loans.
Ease of Living:
- They will help banks themselves which are now looking to reduce physical footprintwith fewer brick and mortar branches, with a ‘light’ banking approach.
- They will open up the rural marketfor service providers besides providing a boost to credit flow.
- DBUs will also provide services related to certain identified government sponsored schemes.
- It is also cheaper to establish than a new branch, and can provide better customer experience aided by technology.
- These units can help in providing personalised finance management tools to new consumers, require lesser staff, with cheaper maintenance due to technological tools and hence can be high-yield units for the parent bank.
- It will encourage more financial literacyand a favourable outlook towards digital banking.
- DBUs will provide end-to-end digital processing of small ticket retail and MSME loans, starting from online applications to disbursals.
Challenges:
- There is low public awareness regarding these banks.
- Internet penetration in lower-tier cities and rural areas is low.
- Digital banking units are prone to vulnerabilities and hackssuch as phishing, pharming, identity theft, and keylogging.
- Banking institutions will need huge investment in their security systems.
While the immediate benefit of DBU’s might be limited to underbanked and unbanked in rural areas, it will substantially lead to technological innovation opportunities in banking sector and further boost the digitalization of Indian Banking System.
