The Reserve Bank of India on 28th June 2021 has notified the Guidelines on Managing Risks in Outsourcing of Financial Services by Co-operative Banks in which it has specified that a bank shall retain ultimate control of outsourced activities. Co-operative banks will now have to conduct a self-assessment of their existing outsourcing arrangements and bring the same in line with the guidelines released on Monday within six months.
Co-operative banks which choose to outsource financial services, however, shall not outsource core management functions including policy formulation, internal audit and compliance, compliance with KYC norms, credit sanction and management of investment portfolio. However, where required, experts, including former employees, could be hired on a contractual basis subject to the Audit Committee of Board/Board being assured that such expertise does not exist within the audit function of the bank.
The co-operative banks shall consider all relevant laws, regulations, guidelines and conditions of approval, licensing or registration when performing its due diligence in relation to outsourcing.
Further, the co-operative banks shall give wide publicity to the Grievance Redressal Machinery within the bank and also by placing the information on their website. It should be clearly indicated that co-operative banks’ Grievance Redressal Machinery will also deal with the issues relating to services provided by the outsourced agencies.
