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State PCS

Mains Practice Questions

  • Q. Digital Banking units (DBU) will ensure fintech innovations reach the grassroots of India in a consumer-friendly manner. Discuss (150 words).

    19 Oct, 2022 GS Paper 3 Economy


    • Introduce by defining Digital Banking Units.
    • Discuss the significance of Digital Banking Units in India.
    • Discuss the challenges faced by Digital banking units in India.
    • Discuss how Digital Banking Unit (DBUs) will ensure fintech innovations reach the grassroots of India.
    • Conclude accordingly.


    • A Digital Banking Unit (DBUs) is a specialised fixed point business unit or hub, set up by scheduled commercial banks, housing certain minimum digital infrastructure for delivering digital banking products and services as well as servicing existing financial products and services digitally in self-service mode at any time.
    • The DBUs are being set up with the objective to ensure the benefits of digital banking reach every nook and corner of the country and will cover all the States and Union territories.


    • Significance of Digital Banking Units:
      • The DBUs will enable those who do not have Information and Communications Technology (ICT) infrastructure to access banking services digitally.
      • They will also assist those who are not tech savvy to adopt digital banking.
      • With the rapid rise of digital banking units, it would develop digital infrastructure to support digital banking digital payments, and FinTech innovation.
      • Services being offered through DBU include banking facilities like opening of savings account, balance-check, print passbook, transfer of funds, investment in fixed deposits, loan applications, stop-payment instructions for cheques issued, application for credit / debit cards, view statement of account, pay taxes, pay bills, make nominations, etc.
      • The DBUs will also facilitate onboarding to Government credit link schemes through the Jan Samarth portal and end-to-end digital processing of small ticket MSME/retail loans.
    • Challenges of Digital Banking Units:
      • Lack of digital literacy: Due to the targeted scheme of government for senior citizens regarding their pensions, many senior citizens walk to banks. These old-aged citizens are unknown to the technical terms and would not be able to access the internet.
      • Threat of Cyber-attack: As per the regulations of NITI Aayog, there is no provision for any cyber security. Therefore, protecting digital data and third-party involvement will be a concern.
      • Lack of regulation: DBUs do not have legal personality and are not licensed under Banking Regulation Act, 1949.
    • How it will ensure fintech innovations reach the grassroots of India:
      • The opening of digital banking units would enhance full banking activities in 1.5 lakh Indian Postal Offices and increase interoperability across banks for digital transfers trying to grow into rural areas.
      • DBU will provide banking services including cash deposit & withdrawal 24 x 7.
      • People not having digital connectivity or computing devices at their premise can do banking transactions from DBU.
      • Further, bank staff will be available to help and guide users for banking transactions in assisted mode, which is not provided by traditional banks.


    • The digital economy is growing rapidly. All parts of the economy, including commerce, financing and logistics, need next-generation solutions.
    • The focus on digital banking units will also help in reskilling human capital for the new-generation economy.
    • However further, challenges such as cyber security, data privacy and phishing need to be resolved if DBUs are to reach their full potential.

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