Why in the News?
Launched in 2022 as part of India’s Azadi Ka Amrit Mahotsav, Digital Banking Units (DBUs) were introduced to bring digital banking services to remote and underserved regions. However, their growth has been slow due to issues like high setup costs, poor internet connectivity, and low digital awareness, raising concerns about their long-term viability and impact.
What Are Digital Banking Units (DBUs)?
Overview:
DBUs are physical centers equipped with advanced digital infrastructure, designed to offer a range of self-service banking facilities around the clock. They aim to promote financial inclusion by providing digital banking access in areas where traditional banking is limited.
Launch & Coverage:
Set up in 75 remote districts across India, DBUs were launched to mark the country’s 75th year of independence. These units are established by Scheduled Commercial Banks (excluding RRBs, Payment Banks, and Local Area Banks) that have prior experience in digital banking.
Regulatory Guidelines (RBI):
- Must be physically separate from existing bank branches with independent entry/exit.
- Equipped with technologies like Interactive Teller Machines, Cash Recyclers, and Video KYC systems.
- Supervised by a senior bank official.
Services Offered:
- Cash deposits and withdrawals
- e-KYC based account opening
- Bill payments
- Internet banking kiosks
- Passbook printing
How Do DBUs Differ From Digital Banks?
- Hasty Implementation Without Local Insights
Banks had only 45 days to set up DBUs in centrally chosen locations, without considering local needs or digital readiness levels, leading to mismatches between demand and supply. - High Infrastructure Costs
The RBI mandates costly infrastructure like video KYC booths and dedicated premises, which may not be economically viable in low-footfall areas. - Low Digital Literacy
Many users, especially in rural areas and among elderly populations, lack the skills to operate digital interfaces, reducing DBU usage. - Poor Connectivity and Power Supply
Inadequate internet and frequent power outages disrupt operations, making it difficult for DBUs to function smoothly in remote areas.
Measures to Improve the Effectiveness of DBUs
- Need-Based Expansion Strategy
Instead of a centralized rollout, DBUs should be established based on local demand, digital literacy levels, and existing banking penetration. A data-driven approach can help identify optimal locations. - Enhance Digital Awareness and Training
Leverage initiatives like PMGDISHA (Pradhan Mantri Gramin Digital Saksharta Abhiyan) to educate citizens. Collaborate with local bodies and NGOs to conduct training sessions targeting women and senior citizens. - Improve Infrastructure and Connectivity
- Expand BharatNet Project to ensure reliable internet in rural areas.
- Install solar-powered backup systems to address power shortages.
- Introduce Human Assistance
Despite being self-service units, DBUs should provide on-site support for first-time users and those facing difficulties. Multilingual interfaces and local language assistance can make these services more accessible. - Promote Financial Products Through DBUs
Encourage uptake of government schemes like:- Pradhan Mantri Suraksha Bima Yojana (PMSBY)
- Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)
- Atal Pension Yojana (APY)
Also facilitate easy access to digital credit products like e-Mudra , PM Mudra Yojana , and MSME loan schemes.
Conclusion
While DBUs represent a significant step toward financial inclusion, their success depends on addressing infrastructural, technological, and educational gaps. With strategic planning, better integration with local communities, and improved accessibility, DBUs can become powerful tools for inclusive and sustainable digital banking in India.
