The Reserve Bank of India has issued guidelines allowing scheduled commercial banks to open digital banking units. These will be specialized fixed point business units to deliver digital banking products and services to customers, the regulator said.
“… as part of efforts to accelerate and widen the reach of digital banking services, the concept of ‘Digital Banking Units’ (DBUs) is being introduced by the Reserve Bank,” the RBI said.
The guidelines are based on the recommendations of a working group set up by the regulator, which included representation from banks and the Indian Banks’ Association.
All scheduled commercial banks, excluding regional rural banks, payments banks and local area banks can open digital banking units. Those choosing to open such units must also have experience in digital banking, the RBI said.
According to the rules set by the regulator:
Digital banking units may be opened in tier-1 to tier-6 cities.
A digital banking unit may have instruments such as interactive teller machines, interactive bankers, service terminals, interactive digital walls, document uploading, self-service card issuance devices, video KYC apparatus, etc.
Products offered by the digital banking unit should be on both liabilities and assets side of the balance sheet of the digital banking segment.
The digital banking units are expected to migrate to more structured and custom-made products, from standard offerings by use of its hybrid and high quality interactive capabilities.
Any product or service, which a bank is not permitted to offer as per the provisions of the Banking Regulation Act, shall not be offered by the unit.
For the back-end, banks can adopt more core-independent, digital-native technologies offering better scalability and flexibility in creating new or reusable digital environments.
If the digital banking segment of a bank uses an application programming interface layer to connect with external third-party application providers, the same should be tested in an isolated or test environment before being integrated to the bank’s core systems.
The establishment of digital banking units should be part of the digital banking strategy of the bank.
Bank boards must appoint a sufficiently senior officer to act as a chief operating officer of each digital banking unit.
Adequate safeguards for cybersecurity of the digital banking units will have to be ensured by the banks.
A bank’s board should ensure regular on-site and off-site monitoring, covering all aspects of the guidelines at these units.
Among liabilities products, a digital banking unit must at least provide provisions for account opening, mobile banking, internet banking and digital payments services for merchants, among others.
Under the asset products, the unit must allow making applications and onboarding of customer for identified retail, micro, small and medium enterprises or schematic loans. The unit can also provide identified government loan schemes which are covered under the national portal.