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India is likely to formulate guidelines on outsourcing banking activities
Outsourcing banking activities is accelerating in India.
Reserve Bank of India is likely to formulate guidelines on outsourcing banking activities by July to improve regulatory oversight for risk management of this segment.
The central bank has formed the internal group on regulatory guidelines on outsourcing, RBI Deputy Governor K Udeshi said addressing a seminar on information technology in banking, finance and insurance organised by Indian Bank's Association here.
Later speaking to reporters, Udeshi said the guidelines would deal with prudential norms, risks involved in outsourcing including those concerned with operations and they are expected to be in place by July.
Last week, RBI Deputy Governor Shyamala Gopinath had said that commercial banks are resorting to outsourcing for reducing costs and increase efficiency.
This has potential to transfer risk to third party, which is outside regulator's ambit. The banks should be careful about outsourcing activities, which are critical to banking operations, Gopinath had said.
Earlier addressing IBA seminar Udeshi said banks need to develop technology systems, which are conducive to clientele.
Commercial banks should be cautious in their efforts to meet Basel II norms, as it requires voluminous data, she said.
The entire process would require some kind of data cleansing and scrubbing and hence, should ensure data integrity, she added.
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