Reserve Bank of India issues guidelines for digital banking units and keeps interest rates on hold

India’s central bank and regulatory body, The Reserve Bank of India has issued guidelines allowing scheduled commercial banks to open digital banking units (DBUs).

The Indian government announced that there will be at least 75 DBUs set up, which are specialised fixed point business units that deliver self-served and assisted digital banking products and services around the clock.

According to the RBI, all scheduled commercial banks, excluding regional rural banks, payments banks and local area banks are able to open digital banking units, but those who decide to open them must have previous digital banking experience.

DBUs can be opened in tier 1 to tier 6 cities, according to the RBI’s classification system, which is based on a city’s population size.

The Reserve Bank of India’s tier classification system

Tiers	Population
Tier 1	100,000 and more
Tier 2	50,000 to 99,999
Tier 3	20,000 to 49,999
Tier 4	10,000 to 19,999
Tier 5	5000 to 9999
Tier 6	less than 5000

 

The Reserve Bank of India also recently announced its monetary policy, which saw it keep interest rates at 4% for the 11th consecutive time. GDP growth forecast was lowered from 7.8% to 7.2%., whilst inflation for FY23 is seen at 5.7%.

In response to the monetary policy review,  Omar El-Gazzar, EM FX Trader, Crown Agents Bank, said: “No major surprises from The Reserve bank of India this morning as they voted to keep interest rates on hold. The Repurchase rate was kept at 4%, despite the inflation outlook being raised to 5.7% for the fiscal year to reflect higher oil prices.

“The RBI has also increased its oil barrel price assumption to $100, and Governor Shaktikanta Das stated the central bank would start to remove liquidity from the banking system. USD/INR is trading 0.2% lower off the back of the comments; the slight change in tone sets the RBI up for policy normalisation in future meetings.”