The RBI has created a roadmap for banks and NBFCs to outsource their IT needs.

Reserve Bank of India published a draft Master Direction on Outsourcing of IT Services for banks, non-banking financial institutions, and other regulated entities . Banks have been consistently outsourced a substantial amount of their IT activities to third parties, placing them in jeopardy, the central bank says .

New Delhi, India, June 24: The Reserve Bank of India published a draft Master Direction on Outsourcing of IT Services for banks, non-banking financial institutions, and other regulated entities, and they have been consistently outsourced a substantial amount of their IT activities to third parties, placing them in jeopardy, according to the central bank.The deadline for submissions and feedback is July 22, 2022.According to the draft, the regulated entities should ensure that outsourcing arrangements neither impair their ability to fulfill their obligations to their customers nor hinder effective oversight by the governing body, adding that such arrangements, however, will be subject to on-site or off-site inspection and scrutiny by the controlling body.The draft recommended that the regulated entities analyze the need for outsourcing of IT services based on a comprehensive evaluation of the benefits, risks, and availability of appropriate mechanisms to mitigate those risks.

This includes, among other things, having appropriate contingency and exit plans.In addition, the draft stated that it would be ensured that records are readily available to the regulated entity and the oversight body would not be harmed even in the event of liquidation of the service provider.Lastly, the Outsourcing of IT Services strategy should include a concrete transition plan for outsourced IT activities or IT-enabled services, while still guaranteeing business continuity during and after departure, according to the draft.