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Digital Banking Brings Banks To The Poor

Context

Prime Minister Modi used video conferencing to dedicate 75 Digital Banking Units (DBU) across 75 districts to the nation.

Relevance

GS Paper – 3 : Mobilization of Resources, Growth & Development, Banking Sector & NBFCs, Inclusive Growth

Mains Question

The Pradhan Mantri Jan Dhan Yojana (PMJDY) is required to bring the unbanked into the fold of institutional finance. Do you agree that this is important for the financial inclusion of the poorer segments of Indian society? Make arguments to support your position. (150 words)


Units of Digital Banking (DBU)

  • A digital banking unit is a specialised fixed point business unit or hub that houses the bare minimum of digital infrastructure for the delivery of digital banking products and services.
  • It will also provide existing financial products and services in a self-service mode digitally at any time.
  • In other words, DBUs are physical locations that offer a variety of digital banking services to customers. This includes the following:
    • Opening a savings account, checking the balance, printing a passbook, transferring funds, investing in fixed deposits, loan applications, paying bills, and so on.
  • DBUs strive to provide cost-effective, convenient access to banking products and services, as well as an enhanced digital experience, all year.
  • They will be in charge of spreading Digital Financial Literacy, with a special emphasis on customer education on cyber security awareness and safeguards.

Who will be in charge of establishing these DBUs?

  • DBUs can be opened by commercial banks (other than regional rural banks (RRBs), payment banks, and local area banks) with prior digital banking experience.
  • Unless otherwise specified, these banks are permitted to do so without the need for individual permission from the RBI.

Background: DBUs in the 2022-23 Budget

  • In the Budget for 2022-23, the Finance Minister emphasised the importance of DBUs at a time when digital banking, digital payments, and fintech innovations are expanding rapidly in the country.
  • To commemorate India’s 75th anniversary of independence, she proposed that Scheduled Commercial Banks establish 75 Digital Banking Units (DBUs) in 75 districts across the country.
  • PM Modi dedicated 75 DBUs across 75 districts to the nation, saying the DBUs will increase financial inclusion by bringing banks to the doorsteps of the poor.

Key Points of the Speech

  • Stressed the significance of the digital economy
    • Today, the digital economy is a major strength of our economy, of our start-up world, of Make-in-India, and of self-reliance in India.
  • Adopting a digital economy helps India become self-sufficient while also benefiting the environment by reducing paper consumption.
    • The government intends to provide maximum services with minimal infrastructure, and all of this will be done digitally and without the use of paper.
    • DBU is a significant step toward making life easier for ordinary citizens.
  • Attempts were made to bring the bank closer to the people.
    • A significant shift occurred from the days when it was expected that the poor would go to the bank to a scenario in which the banks came to the poor’s doorstep.
    • The government eliminated not only the physical distance, but also the psychological distance.
    • Today, more than 99 percent of Indian villages have a bank branch, banking outlet, or ‘banking mitra’ within a 5-kilometer radius.
    • An extensive Post Office network was also tapped by India Post Banks to meet the banking needs of ordinary citizens.
    • Today, India has more branches per one lakh adult citizens than countries such as Germany, China, and South Africa.
  • The Prime Minister acknowledged global acclaim for India’s digital banking infrastructure.
    • India’s digital banking infrastructure has been lauded by the IMF.
  • UPI has provided India with new opportunities.
    • There are currently 70 crore indigenous Rupay cards in use. This convergence of technology and economy improves the dignity and affordability of the poor while also empowering the middle class.
  • Fintech is central to India’s policies.
    • If Jan Dhan accounts were the foundation of financial inclusion in the country, Fintech would be the foundation of the financial revolution.
  • He was referring to the government’s announcement of the launch of a digital currency based on blockchain technology in this context

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December 2022
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