Banks to ensure high standard in outsourced services: RBI

The quantum of excess provision reversed to the profit and loss account on account of sale of NPAs shall be disclosed in the financial statements of the bank 

The RBI has directed asked banks to ensure high standard of care while outsourcing financial services and directed them to put in place a robust system of internal audit of all such activities.

"Banks have been advised to take steps to ensure that the service provider employs the same high standard of care in performing the services as would be employed by the banks, if the activities were conducted within the banks and not outsourced," the RBI said in a notification on Wednesday.

"Banks should not engage in outsourcing that would result in their internal control, business conduct or reputation being compromised or weakened," the RBI further said.

In certain cases, like outsourcing of cash management, banks should ensure that reconciliation of transactions between the bank and the service provider are carried out in a timely manner, the notification said.

The quantum of excess provision reversed to the profit and loss account on account of sale of NPAs shall be disclosed in the financial statements of the bank under ‘Notes to Accounts’.