Eight years ago, the country’s largest bank, State Bank of India (SBI), came up with the idea of digital-only branches. These branches operated with minimum human intervention, allowing customers to use the self-assisted mode for printing their pass books, opening accounts, availing loans, etc. They also enabled a customer to talk to a remote banker through a video link. It was an innovative idea, but the initiative focussed on the big cities at that time.
This February, the government picked up the idea and made it a national goal to support financial inclusion, when Finance Minister Nirmala Sitharaman announced the establishment of 75 digital banking units (DBUs) across 75 districts in Budget 2022-23. While the government was a catalyst, banking regulator Reserve Bank of India (RBI), the Indian Banks Association and commercial banks selected the districts. For instance, ICICI Bank has opened a DBU in Kohima, Nagaland and Kotak Bank has opened one in Mehsana, Gujarat.
Currently, these DBUs—spread across districts like Jhansi (in UP), Thrissur (Kerala), Bongaigaon (Assam), Gomati (Tripura), and Aizawl (Mizoram)—provide banking services like cash withdrawal, deposit, fund transfer, investment, insurance, etc. These DBUs are open 24x7 for use in self-service mode. During daytime, bank officials are present to guide customers. “DBU is a big step in the direction of ease of living for the common citizens,” declared Prime Minister Narendra Modi, while kicking off the DBU operations.
The establishment of DBUs is another step towards greater financial inclusion following the government’s drive in early 2014, after which banks opened 400 million new accounts called Jan Dhan. Similarly, the setting up of differentiated banking platforms like payments banks and small finance banks was yet another initiative to create an institutional framework to help the urban poor and rural folk bank. “DBUs will enable customers who do not have a PC, laptop, or smartphone to access banking services. They can do it digitally,” said Sitharaman on the day of the launch. For context, there are 72,000 branches (58 per cent of all branches) in rural and semi-urban areas where most of the DBUs have been created. “These units provide digital facilities with a human presence. The human element is essential, especially in remote locations,” says Arvind Vohra, Country Head of Retail Branch Banking at HDFC Bank.
Clearly, the setting up of DBUs has created an additional digital layer in the smaller geographies. “DBUs will provide end-to-end digital processing of small-ticket retail and MSME loans, starting from online applications to disbursals,” said RBI Governor Shaktikanta Das at the virtual launch of DBUs. Some experts, however, argue that DBUs are not necessary at a time when options like net banking, mobile banking, kiosks, UPI, etc. are available. SBI, too, switched to YONO, a digital banking platform, rather than expanding its own digital branch network.
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