RBI deputy governor Swaminathan J. urges lenders to gain a deep understanding of the technology, control environment, and the concentration risk that arises when they depend on the same provider.

Banks can't rely on service providers' assurance: RBI deputy guv on technology outsourcing

India's Central Bank Warns Banks Against Relying on Third-Party Service Providers

Reserve Bank of India (RBI) deputy governor Swaminathan J. has cautioned lenders that they cannot simply rely on third-party service providers for outsourced solutions.

Caution Urged Amid Rise of Digital Transformation

Swaminathan emphasized the importance of gaining a deep understanding of the technology, control environment, and concentration risk that arises when many banks depend on the same provider.

With more banking operations moving to cloud and third-party platforms, a glitch that once disrupted a single branch can now impact millions of customers simultaneously.

Real-World Examples of Technical Failures

Barclays Outage (January 2025): The UK's largest lender experienced a massive app and online banking outage, locking out over 20 million customers and disrupting critical services like payments.
State Bank of India (SBI) Disruptions (April 2025): SBI customers faced disruptions in mobile banking and fund transfers.
Unified Payments Interface (UPI) Outages (2025): The popular fast-payments network experienced multiple outages, causing a five-hour disruption that severely affected inter-bank transfers and merchant payments.

Such disruptions highlight the risks of relying on third-party service providers in a banking era where customers seldom visit physical branches.

IT Resilience and Cybersecurity

Swaminathan also emphasized the need for banks to go beyond technology alone in detecting and preventing cyber frauds.

Sharing of fraud typologies: Banks should share information on common types of fraud to stay ahead of cyber threats.
Coordinated efforts: Banks should work together to take down mule accounts and disrupt cybercrime networks.
Collaboration with law enforcement agencies: Banks should collaborate with law enforcement agencies to stay informed about emerging cyber threats.

By understanding the importance of IT resilience and cybersecurity, banks can better prepare themselves for the challenges of the digital age.