Digital Banks May Boost Inclusive Banking

Last month, the union finance minister reiterated the government’s resolve to open 75 digital banks in 75 districts. Explaining the rationale for the initiative, the Reserve Bank of India (RBI) noted that the new digital banking units (DBUs) will improve the availability of digital infrastructure for accelerating and extending the delivery of banking services. Conceptually, a DBU can provide any banking product or service that can be delivered through the internet or mobile banking. The DBUs can also engage digital business facilitators or business correspondents to further expand their operations into unbanked areas.

The RBI guidelines now allow any scheduled commercial banks (excluding regional rural banks, local area banks, and payment banks) with past digital banking experience to open DBUs in Tier-1 to Tier-6 centres. The DBUs have the option to insource or outsource banking services facilities, but they are to be housed separately from the existing banking outlets. However, the DBUs can share their core banking system with incumbent systems and their governance and administrative structure are to be aligned with the digital banking activities of the promoter banks.