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RBI issues guidelines for managing risk in outsourcing of financial services by Co-operative Banks

The Reserve Bank of India (RBI) observed that the co-operative banks are increasingly using outsourcing to reduce costs and avail specialist expertise, where these are not available internally.

While it is entirely the banks’ prerogative to view the desirability of outsourcing as a permissible activity about all relevant factors, including the commercial aspects of the decision, such outsourcing results in banks being exposed to various risks. To enable the co-operative banks to put in place necessary safeguards for addressing the risks inherent in outsourcing of activities, the RBI issued guidelines on managing risks in outsourcing are provided in Annex.

Co-operative banks are advised to conduct a self-assessment of their existing outsourcing arrangements and bring the same in line with these guidelines within a period of six months from the date of issue of this circular.


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