Regulated entities need to assess the reliability, security and regulatory compliance of the third parties to ensure that they meet the required standards: Shri M Rajeshwar Rao, Deputy Governor, Reserve Bank of India (RBI) at CareEdge Ratings event

by Samiksha

Calls for more diversification in third-party and digital outsourcing fintech ecosystem in BFSI sector

• Urges all the regulated entities to treat the customer complaint with due gravitas and use it as a feedback mechanism

• CareEdge Ratings hosted “Conversations”, its annual event on the topic ‘BFSI - Navigating Growth and Risk’

Mumbai, July 2024: Addressing the CareEdge Ratings “Conversations” conference in Mumbai, Shri M Rajeshwar Rao, Deputy Governor, Reserve Bank of India (RBI) calls for the regulated entities to assess the reliability, security and regulatory compliance of the third parties to ensure that they meet the required standards.

Addressing the keynote in the conference, Shri M Rajeshwar Rao highlighted that third-party dependencies and digital outsourcing has become integral to the operations of the financial service entities, to enhance efficiency to reduce costs and improve customer experience. However, the third-party dependencies can also pose certain risks and challenges.

Mr. Rao called for the third-party fintech and digital outsourcing entities to ensure that robust cyber security measures are deployed by the service providers to safeguard against any cyber-attack threats. He also stressed on the need of vendor diversification, as dependence on third parties can create vendor lock in situations where regulated entities become reliant or captured by a single vendor of critical services, in order to avoid dependency risks and offer more flexibility of the entities for adapting changing market conditions or technological advancements. He urges all the regulated entities to treat the customer complaint with due gravitas and use it as a feedback mechanism.

In the conference, Mr. Rao also highlighted on the need for fostering growth and ensuring consumer protection, in order to sustain this transformation and an enduring commitment to safeguarding financial stability. He mentioned that there is a need for huge set of financial resources, people resources, technological resources, and skill sets, to enable a robust and sustainable growth. He also spoke on improvement in response time to customer queries and complaints, and on the lack of transparency in the fees charges in Banking & Financial Services industry.

Shri. Mehul Pandya, MD & Group CEO of CareEdge Ratings said “The pursuit of business growth is important. But it should never come at the expense of taking on unacceptable business risk. Robust risk mitigations are essential for ensuring long term success and resilience of a regulated entity as well as the overall financial system. Indeed, providing financial stability to the system is a prerequisite to sustainable growth that requires attention at the level of the individual institution.”

“The Indian banking banking sector is in an overall good health as reflected by the sustaining the profitability and capital buffers. At the same time, a notable trend also is the rising share of the personal and the services sectors, which is a significant transition from the infra heavy exposures to more granular and diversified book. While, the NBFC sector also continues to improve as its growth is expected to reach the pre-pandemic levels soon”, added Mehul Pandya.

CareEdge Ratings successfully hosted “Conversations”, its annual event on the topic ‘BFSI - Navigating Growth and Risk’.  The event featured distinguished thought leaders and industry experts from Banking & Financial Services Industry. Shri M Rajeshwar Rao, Deputy Governor, Reserve Bank of India (RBI) graced the event as the Chief Guest, presented the keynote speech. A panel discussion on the topic ‘Is banking system equipped to finance India’s growth?’ featuring Shri Ashwini Kumar Tewari , MD, State Bank of India, Shri Rajneesh Karnatak Managing Director & CEO, Bank of India, Shri Rajkiran Rai Managing Director - NABFID, National Bank for Financing Infrastructure & Development & Shri Kaushik Shaparia CEO Emerging Asia & India, Deutsche Bank as the panellist. While, a panel on the topic 'Navigating growth admist regulatory changes' was discussed by Shri Rajiv Sabharwal Managing Director & CEO, Tata Capital Ltd, Shri Virendra Pankaj CEO, Aseem Infrastructure Finance Limited and Shri Jairam Shridharan Managing Director, Piramal Capital & Housing Finance Ltd (Piramal Finance).