In the Union budget 2022, the government announced a series of measures relating to Digital banking. This move is in keeping pace with the increased use of digital payments and finance- technical innovations (also known as “fintech”).

Digital banking: Decoded

• Digital banking is banking done online / through digital platforms.
• It is an easier alternative to traditional banking system.
• It is meant to be faster, convenient and paper less as there is no cheques, pay in slips, demand drafts etc. 
• Being available online, banking transactions can be done 24/7 without actually having to go to a bank. Also, it can be done through mobile phones, tablets, laptops etc.
• Banking transactions such as fund transfers, opening / closing bank accounts, payment of interest on loans, loan closure, bill payments, bank statements, FD’s, RD’s etc become extremely easy and convenient.
• Digital banking is broader in scope and includes online banking and mobile banking. For instance, YONO, YONO Lite, SBI online are a few digital platforms introduced by the State Bank of India (SBI) for a host of services.
• Digital banks use software powered by artificial intelligence (AI) and Machine learning (ML). They will automate regular routine transactions. This will also minimize errors.
• Digital banks offer additional services such as cryptocurrency which traditional banks do not offer. With the budget also focusing on cryptocurrency in a big way, the role of digital banks will only become more significant.

Digital Banking, digital currency and the Union Budget 2022

The union budget 2022 announced certain key features relating to the digital banking, currency and related aspects:      

1. All 1.5 lakh post offices in the country will be integrated with the core banking system. net banking, fund transfers and withdrawals will be possible through post offices as well. This will benefit people especially in rural areas as they use post offices as means of depositing their funds. This will directly encourage digital banking.
2. Setting up of 75 Digital Banking units (DBU’s) in 75 districts of the country by scheduled commercial banks. By doing so, the government aims at attracting larger customer base as those who don’t have access to banks or banking channels will join the DBUs.
3. The previous Union budget (2021) announced introduction of Rs. 1,500 crores to the fintech and digital financial ecosystem. The Covid pandemic led to manifold usage of digital / online payments. The budget 2022 has stated the same incentives will continue this year as well. Integrating digital payments with digital banking units (DBUs) will ensure financial inclusion of all sections of the society.
4. The RBI proposes to introduce digital currency / digital rupee using block chain technology from FY 2022-23 onwards. The Central bank digital currency (CBDC) is further expected to boost digital banking.
5. Digital assets such as cryptocurrency / bitcoins has been brought under the tax ambit. There will be a tax of 30% on income earned from cryptocurrencies. While the legality is still a grey area and there is no express law governing it, a taxation angle indicates that a legislation will be eventually put in place for this virtual digital asset. Digital banking will help deal with cryptocurrencies as well.  

Financial inclusion is one of the key pillars on which the union budget 2022 rests on. Clearly, digital banking is the present and future of the Indian economy.