The Reserve Bank of India will soon issue draft guidelines on outsourcing of financial services by financial institutions, the central bank said in its Statement on Developmental and Regulatory Policies, released alongside the monetary policy statement today.
The draft norms, deemed to be titled ‘Reserve Bank of India (Managing Risks and Code of Conduct in Outsourcing of Financial Services) Directions, 2022’, will be issued for public comments and feedback shortly, said the central bank.
The objective of the revised guidelines will be to update and harmonise the extant guidelines, adopt and incorporate global best practices and also enable entities to have all current instructions on outsourcing of financial services, in one place for reference.
The RBI said regulated entities are increasingly using outsourcing as a means for reducing costs as well as for availing expertise not available internally. While this is allowed and an operational decision made by the entities in question, such a practice “exposes REs to various risks”, it said.
In the past, the central bank has issued several norms on managing risks in outsourcing of financial services for commercial banks excluding regional rural banks, non-banking finance companies, housing finance companies and co-operative banks.
The revised norms will expand the scope of the directions to include regional rural banks, local area banks, AIFI (All India Financial Institutions), CIC (credit information companies) and non-scheduled payments banks, said the RBI.
August 05, 2022