Date:14/08/2005 URL: http://www.thehindubusinessline.com/2005/08/14/stories/2005081401730100.htm

Back IBA panel to discuss outsourcing norms next week

Priya Nair

Mumbai , Aug. 13

A COMMITTEE of Indian Banks' Association (IBA) will discuss next week the Reserve Bank of India's proposal to regulate outsourcing of banking activities.

RBI, which is expected to issue prudential guidelines on outsourcing of financial services shortly, has sought the views of IBA on the subject, an IBA official said.

IBA's standing technical committee for financial services will be meeting next week to formalise its views on the subject, which would be submitted to the RBI, the official said. RBI wants each bank to have a policy on outsourcing approved by its board in place.

Though the central bank is not against outsourcing per se, it is concerned over the third party risk involved in it. RBI is understood to be of the view that though outsourcing is expected to improve efficiency and reduce cost, it involves risk, which can affect banks if a proper system of check and balance is not in place. Therefore, RBI wants banks to follow certain basic rules while outsourcing their banking activities.

Banks normally outsource business, which are not directly related to critical banking operations. The head of retail services with a private bank said that banks usually outsource jobs which involve data processing. About banks outsourcing financial services, he said those are more an exception than the rule.