Co-operative banks can't outsource core management functions: RBI

The Reserve Bank of India (RBI) on Monday directed co-operative banks not to outsource core management functions such as policy formulation, internal audit and compliance, compliance with KYC norms, credit sanction, and management of investment portfolio.

Issuing guidelines for managing risk in outsourcing of financial services by cooperative banks, the RBI said the lenders can hire experts, including former employees, on a contractual basis subject to certain conditions. Outsourcing is defined as use of a third-party to perform activities on a continuing basis.