RBI official cautions banks against outsourcing core activities

Banks have to ensure that none of their core banking activities are outsourced at any point in time, according to Ajay Kumar Choudhary, Executive Director, Reserve Bank of India. This will ensure stability of the banking system.

“As the technology and systems are evolving, we are observing an increase in the outsourcing of services in the banking and financial sector. With the advent of fintech coupled with easier access to mobile phones, internet, higher speed, higher bandwidth, reduced cost of tech products, the industry is witnessing immense growth in terms of expansion as well as customer acquisition,” Choudhary said at the IBA Banking Technology Conference.

He observed that fintech is transforming the way financial services are delivered (how credit is extended, how payments are made or the way wealth management/ investment advice is provided, insurance is priced, etc).

“Many of the industry participants are focusing on collaborating with fintechs, partnering with them for efficient delivery of financial services,” the RBI ED said.