Outsourcing norms for banks soon

Concerned over the operational risks involved, the Reserve Bank of India (RBI) is set to issue guidelines on outsourcing to banks. The central bank has constituted an internal group to look into the matter.

"The guidelines will look at the operational risks involved as well as the security aspects. These prudential norms should be out by July end," said K J Udeshi, deputy governor, RBI, at the sidelines of a seminar organised by a leading online business daily and the Indian Banks' Association.

Most private and foreign banks outsource various functions such as data entry, data verification, marketing and sales, site/ property inspection for sanctioning of loans among other things to third party bodies.

Outsourcing these functions often backfires leading to pilferage of confidential customer data, improper verification which affects business decision by banks.

Speaking at the seminar, Udeshi urged banks to go rural and set up information kiosks which could double up as vending machines.

"We have 6 lakh villages and there is one bank branch per 18 villages," said Udeshi to show how under-covered the country is in terms of banking services spread. Agriculture contributes nearly 20 per cent to the gross domestic product but gets only 11 per cent of banks' loans.

If mammoth organisation such as Indian Railways can improve services by using technology, banks can also use technology to transform their offerings and reach, she said.

Udeshi also voiced concerns about banks copying the wrong kind of technologies from western markets such as that used for telephone banking.

"I hear numerous complaints from customers about these automated voice machines which are an irritant. Banks need to adopt technologies that are more conducive to the local environment."