Home Resilience Indian authorities launch ‘Digital Banking Units’ in rural financial inclusion push

Indian authorities launch ‘Digital Banking Units’ in rural financial inclusion push

PM-backed initiative: Narendra Modi launched the DBUs via an online broadcast/event that featured representatives of the 75 newly created facilities | Credit: Global Government Fintech screenshot from Narendra Modi’s YouTube channel

Seventy-five government-backed brick-and-mortar facilities to ‘ensure the benefits of digital banking reach every nook and corner of the country’ have been inaugurated in India.

The Digital Banking Units (DBUs) are intended to improve financial inclusion in small towns and villages in the country, which – with 1.4 billion people – is the second biggest in the world by population.

The facilities, which are hosted by pre-existing publicly and privately owned banks, aim to enable people who do not have a mobile phone or internet access to access banking services digitally, as well to help people who are not tech savvy to adopt digital banking.

Services to be offered at the DBUs include the opening of savings accounts, fund transfers, loan applications, application for credit / debit cards, viewing account balances, paying taxes and bills, printing of passbooks and stop-payment instructions for cheques. The DBUs are also designed to facilitate onboarding to government credit link schemes through India’s Jan Samarth portal (launched in June as a single platform for loan application and processing under credit-linked government schemes) and ‘end-to-end’ digital processing of small business and retail loans.

Products and services will be offered to customers in either self-service or ‘digital assistance’ modes although staff will be ‘available to help and guide users for banking transactions in assisted mode’, according to a government announcement.

More than 20 banks involved

Plans for the initiative were revealed by finance minister Nirmala Sitharaman in her presentation of the 2022-2023 Budget earlier this year.

‘In recent years, digital banking, digital payments and fintech innovations have grown at a rapid pace in the country,’ the Budget document noted. ‘Government is continuously encouraging these sectors to ensure that the benefits of digital banking reach every nook and corner of the country in a consumer-friendly manner. Taking forward this agenda, and to mark 75 years of our independence, it is proposed to set up 75 Digital Banking Units in 75 districts of the country by scheduled commercial banks.’

The initiative is being rolled out in collaboration with more than 20 public- and private-sector banks in total, specifically: 11 public sector banks, 12 private banks and one ‘small finance’ bank.

The government’s Press Information Bureau has published a list of all 75 DBUs, showing: the state or union territory in which they are located; the specific locality/district; and the pre-existing bank responsible for the DBU.

For example, two DBUs are located in Andhra Pradesh (in East Godavari and Machilipatam), which are both ‘allocated to’ Ministry of Finance-owned Union Bank of India; and Gujarat has three DBUs (in Vadodara, Mehsana and Surat), with the first allocated to Ministry of Finance-owned Bank of Baroda and the latter two allocated to the privately owned Kotak Mahindra Bank.

Reaching the ‘last mile’

Launching the DBUs on 16 October, PM Narendra Modi described their creation as “a big step in the direction of ease of living for the common citizens”

He said the government aims to provide ‘maximum services with minimum infrastructure’, simplifying banking procedures while also providing a ‘robust and secure’ banking system.

“We have given top priority to ensure that banking services reach the last mile,” he said. “We not only removed the physical distance but, most importantly, we removed the psychological distance.”

Modi became PM in 2014 and shortly after taking office launched India’s ‘Jan Dahn’ financial inclusion programme encouraging the opening of bank accounts. “If Jan Dhan accounts laid the foundation of financial inclusion in the country, then fintech would form the basis of financial revolution,” he said this week during an event that also involved Sitharaman (who joined from Washington DC), Reserve Bank of India (RBI) governor Shaktikanta Das, as well as further ministers, MPs and banking leaders, among others.

With the RBI planning to begin CBDC pilots ‘soon’, Modi also referred to the prospect of a digital rupee. He listed the ‘elimination of the hassle of physical currency’ and environmental benefits as important advantages, saying that the paper and ink for currency printing are imported, and ‘by adopting a digital economy we are contributing to a self-reliant India while also benefiting the environment by reducing the consumption of paper’.

FURTHER READING

‘India to begin CBDC pilots “soon”’ – our news story (12 October 2022) on the Reserve Bank of India’s ‘Concept Note on Central Bank Digital Currency (CBDC) for India’ 

‘India opens up payments and digital ID “global repository”’ – our news story (19 July 2022) on India’s government making its payments and digital ID technology available to all countries worldwide via open application programming interfaces (APIs) under the country’s ‘India Stack’ initiative

‘Nepal adopts India’s UPI payments platform’ – our news story (16 March 2022) on the international arm of the National Payments Corporation of India (NPCI) partnering two companies to roll out India’s UPI in Nepal

‘India to launch digital rupee by early 2023’ – our news story (8 February 2022) on finance minister Nirmala Sitharaman’s presentation of the 2022-2023 Budget

‘India launches e-Rupi for “leak-proof” digital welfare payments’ – our news story (2 August 2021) on India launching a cashless and contactless instrument for government welfare payments

‘“Sceptical” India investigates central bank digital currency’ – our news story (1 February 2021) on the RBI researching how an Indian CBDC could work

‘State payments via QR code take step forward in rural India’ – our news story (28 August 2020) on a regional government (Andhra Pradesh) launching an initiative to promote digital payments and drive financial inclusion