The RBI, which is concerned about financial institutions outsourcing various core activities such as booking of fixed deposits, buy-now-pay-later loans and credit card onboarding, wants to ensure that contracting services Non-regulated entities should not be misused.
After the policy announcement, Governor Das said, “Regulated entities are using outsourcing as a means to reduce costs as well as take advantage of the expertise available internally.” “While outsourcing a permissible activity is an operational decision of regulated entities, it exposes them to various risks.”
The regulator has in the past issued several directives to banks, NBFCs and housing finance companies on managing risks in outsourcing of financial services.
RBI now aims to reconcile all past guidelinesAdopting and incorporating global best practices and enabling all entities regulated by it to have all current instructions on outsourcing financial services in one place for reference.
The central bank will soon issue draft rules for managing risks and code of conduct in outsourcing of financial services. The draft rules will be open for public comments shortly. The ambit of the new directions will be expanded to include Regional Rural Banks, Local Area Banks, All India Financial Institutions, Credit Information Companies and Non-Scheduled Payment Banks.