RBI issues detailed norms for outsourcing of IT services by banks, NBFCs

In its 'Master Direction on Outsourcing of Information Technology Services', RBI said that Regulated Entities (REs) have been extensively leveraging IT and IT-enabled Services (ITeS) to support their business models, products and services offered to their customers

Livemint
First Published11 Apr 2023
Reserve Bank of India RBI building,sansad marg;17/09/2012;photo:pradeep gaur/mint
Reserve Bank of India RBI building,sansad marg;17/09/2012;photo:pradeep gaur/mint

Mumbai: Reserve Bank of India came out with detailed norms for outsourcing of IT services by banks, NBFCs and regulated financial sector entities to ensure that such arrangements do not undermine their responsibilities and obligations to customers.

In its 'Master Direction on Outsourcing of Information Technology Services', RBI said that Regulated Entities (REs) have been extensively leveraging IT and IT-enabled Services (ITeS) to support their business models, products and services offered to their customers.

In February last year, the central bank proposed the issuance of suitable regulatory guidelines on outsourcing of IT services with an aim to ensure effective management of attendant risks. Later, draft norms were issued. According to RBI, the underlying principle of the directions is to ensure that outsourcing arrangements neither diminish REs' ability to fulfil its obligations to customers nor impede effective supervision by the central bank.

With a view to provide REs adequate time to comply with the requirements, the norms will come into effect from October 1, 2023.

A RE shall take steps to ensure that the service provider employs the same high standard of care in performing the services as would have been employed by the RE, if the same activity was not outsourced, the central bank said.

According to the central bank, a RE should not engage an IT service provider that would result in reputation of RE being compromised or weakened.

Notwithstanding whether the service provider is located in India or abroad, REs should ensure that outsourcing should neither impede nor interfere with the ability of the RE to effectively oversee and manage its activities, as per RBI.

Further, REs have been told to evaluate the need for outsourcing of IT services based on comprehensive assessment of attendant benefits, risks and availability of commensurate processes to manage those risks.

On governance framework, RBI said a RE intending to outsource any of its IT activities should have a comprehensive board-approved IT outsourcing policy.

Financial institutions should also put in place a risk management framework for outsourcing that should comprehensively deal with the processes and responsibilities for identification, measurement, mitigation, management, and reporting of risks associated with outsourcing of IT services arrangements.

Also, REs should ask their service providers to develop and establish a robust framework for documenting, maintaining and testing business continuity plan and disaster recovery plan.

A RE can also outsource any IT activity/ IT-enabled service within its business group/ conglomerate, subject to conditions specified to the conditions specified in the Master Direction.

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.MoreLess
HomeNewsIndiaRBI issues detailed norms for outsourcing of IT services by banks, NBFCs

Most Active Stocks

Bharat Electronics

309.55
10:29 AM | 14 JUN 2024
8.6 (2.86%)

Indian Oil Corporation

170.30
10:25 AM | 14 JUN 2024
1.2 (0.71%)

HDFC Bank

1,597.45
10:28 AM | 14 JUN 2024
16.55 (1.05%)

State Bank Of India

840.20
10:29 AM | 14 JUN 2024
-3.7 (-0.44%)
More Active Stocks

Market Snapshot

  • Top Gainers
  • Top Losers
  • 52 Week High

JK Paper

490.70
10:25 AM | 14 JUN 2024
44.35 (9.94%)

KRBL

310.05
10:22 AM | 14 JUN 2024
23.05 (8.03%)

Poly Medicure

2,003.00
09:59 AM | 14 JUN 2024
142.9 (7.68%)

KEC International

935.20
10:25 AM | 14 JUN 2024
66.25 (7.62%)
More from Top Gainers

Recommended For You

    More Recommendations

    Gold Prices

    • 24K
    • 22K
    Bangalore
    73,950.000.00
    Chennai
    73,160.000.00
    Delhi
    73,663.000.00
    Kolkata
    73,016.000.00

    Fuel Price

    • Petrol
    • Diesel
    Bangalore
    102.86/L0.00
    Chennai
    100.75/L0.00
    Kolkata
    103.94/L0.00
    New Delhi
    94.72/L0.00
    OPEN IN APP
    HomeMarketsPremiumInstant LoanGet App