The Reserve Bank of India on Monday released guidelines for co-operative banks to manage risks that could arise from outsourcing of financial services. 

The central bank said the lenders can hire experts, including former employees, on a contractual basis for managing risk in outsourcing of financial services by cooperative banks subject to certain conditions.


  • Chief Executive Officer and the Senior Management of co-operative banks would be responsible for evaluating risks and materiality of all existing and prospective outsourcing activities.
  • Co-operative banks shall be responsible for the actions of their service provider, including actions of business correspondents and their retail outlets/sub-agents.
  • A co-operative bank intending to outsource any of its financial activities will need to put in place a comprehensive outsourcing policy approved by its board.
  • Co-operative banks will also need to put in place a management structure to monitor and control outsourcing activities.
  • Bank shall retain ultimate control of outsourced activities.
  • Conduct self-assessment of their existing outsourcing arrangements and bring the same in line with the guidelines released on Monday within six months.

The underlying principles behind these guidelines are that the co-operative bank should ensure that outsourcing arrangements neither diminish its ability to fulfil its obligations to customers and the RBI, nor impede effective supervision by Reserve Bank of India (RBI)/ National Bank for Agriculture and Development (NABARD)

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