RBI said that Regulated Entities (REs) are leveraging IT and IT-enabled services (ITES) in a big way
The Reserve Bank of India has issued guidelines for provision of IT services by banks, NBFCs and regulated financial sector entities. outsourcing A new criterion has been prepared for And it will come into effect from October 1, 2023. In its Master Direction on Outsourcing of Information Technology Services, the RBI said that regulated entities (REs) are increasingly leveraging IT and IT-enabled services (ITES) to enhance their business models, products and services offered to their customers. can be supported.
In the month of February last year, the central bank had proposed to issue appropriate guidelines on outsourcing of IT services with a view to ensuring effective management of the associated risks. Only after this a new guideline has been issued. According to RBI, the outsourcing arrangement neither impairs the ability of REs to meet their obligations to customers nor impede effective supervision by the central bank.
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Service provider should not be involved
According to the central bank, a RE should not engage an IT service provider that may compromise or undermine the reputation of the RE. Irrespective of whether the service provider is located in India or abroad. According to RBI, outsourcing should neither hinder or interfere with the RE’s ability to effectively monitor and manage its activities.
Further, REs have been asked to evaluate the need for IT services outsourcing based on a comprehensive assessment of the associated benefits, risks and the availability of tailored processes to manage those risks. On the governance framework, RBI said that REs willing to outsource any of their IT activities should have an IT outsourcing policy.
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Risk management structure should be established
Financial institutions should also establish a risk management structure for outsourcing that comprehensively deals with the processes and responsibilities for identifying, measuring, mitigating, managing and reporting the risks associated with outsourcing IT services provisioning. Also, REs should ask their service providers to develop a robust structure for documenting, maintaining and testing the business plan and disaster recovery plan.
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