The Reserve Bank of India vide its notification dated 3rd August 2021 has published the framework for outsourcing of payment and settlement-related activities by PSOs and it is applicable to service providers, whether located in India or elsewhere.
The framework is not applicable to activities other than those related to payment and/or settlement services, such as internal administration, housekeeping or similar functions.
Key highlights from the framework:
- The PSOs shall not outsource core management functions, including risk management and internal audit; compliance and decision-making functions such as determining compliance with KYC norms. However, while internal audit function itself is a management process, the auditors for this purpose can be appointed by the PSO from its own employees or from the outside on contract.
- A PSO, which has outsourced its customer grievance redressal function, must also provide its customers the option of direct access to its nodal officials for raising and / or escalating complaints. Such access should be enabled through adequate phone numbers, e-mail ids, postal address, etc., details of which shall be displayed prominently on its website, mobile applications, advertisements, etc., and adequate awareness shall also be created about the availability of this recourse.
- The PSO shall put in place a management structure to monitor and control its outsourcing activities. It shall ensure that outsourcing agreement with the service provider contains provisions to address monitoring and control by it of the outsourced activities.
- The PSO shall, at least on an annual basis, review the financial and operational conditions of the service provider to assess its ability to fulfil its outsourcing obligations. Such due diligence reviews shall highlight any deterioration or breach in performance standards, confidentiality and security, and in business continuity preparedness.
- A central record of all outsourcing arrangements shall be maintained and it shall be readily accessible for review by the board and senior management of the PSO. The record shall be updated promptly, and half yearly reviews shall be placed before the board or its senior management.
