MUMBAI: The digital banking unit (DBU) initiative — banks’ attempt to connect with the unbanked and the underbanked population using their digital prowess — largely remains on paper three years since its launch, with banks adding just 25 units to the initial 75.
Several bank officials FE spoke to remained sceptical about the future of the initiative, and one of them summed up the situation well: “It’s just a box-ticking exercise.”
For a population of 1.4 billion, 100 DBUs seem like a drop in the ocean, bank officials said.
They said the DBU initiative has been overshadowed by the growing presence of business correspondents (BCs) who provide banking services like account opening, loans, and investment products on the doorstep. With around 1.35 million BCs and counting, customers have little incentive to visit DBUs. “BCs have made DBUs redundant,” said another banker. “When banking is on your doorstep, why visit a banking kiosk?”
Bank officials said the concept of DBU looked good on paper, but it failed to translate into reality. “Customer acceptance is crucial for DBUs’ success, but it’s just not happening,” said a banker, citing lack of awareness about DBUs, low financial literacy in rural and semi-urban India, and higher operational expenditure as reasons behind the dismal uptake.
Mobile and digital banking proliferation has further reduced the need for DBUs. Customers are now spoilt for choice, and DBUs seem like an afterthought.
Though regulators have prioritised digital banking, DBUs are not in the top of the list. “Financial inclusion requires a tailored approach,” said a source. “We’ve added over half a billion bank accounts via the Jan Dhan scheme, but there’s still work to be done.” The focus is on deepening financial inclusion through other channels.
The financial viability of DBUs is also a concern. Infrastructure, technology and personnel costs have marred the initiative. However, bankers believe cost isn’t the primary concern. “It’s not about the cost, it’s about customer acceptance and relevance,” said a banker.
However, not all hope is lost. With insurance and mutual fund penetration below 5%, banks may need to reassess their DBU strategy. Integrating digital services with existing branch networks and BCs could provide a seamless customer experience and drive financial inclusion. “DBUs need to be more than just a physical presence,” said the banker. “They need to offer something unique and valuable to customers.” As the banking landscape evolves, DBUs need to adapt and find their place. Whether it’s through innovative services or strategic partnerships, DBUs need to prove their worth.
Source: The Financial Express
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