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Corporate Laws Central Ministry of Finance Reserve Bank of India Act, 1934

Reserve Bank of India (Non-Banking Financial Companies - Managing Risks in Outsourcing) Directions, 2025

28-Nov-2025 | RBI/DOR/2025-26/363 DOR.ORG.REC.No.282/21-04-158/2025-26

RBI has issued RBI (Non-Banking Financial Companies - Managing Risks in Outsourcing) Directions, 2025 effective from 28th November 2025. Existing IT outsourcing contracts must comply by April 10, 2026, or at renewal whichever is earlier. Key Highlights: 1. Applicability - Applicable to NBFC-D, NBFC-ICC, NBFC-MFI, NBFC-IFC, IDF-NBFC, HFCs, SPDs, CICs, NBFC-AA, NBFC-P2P and others. Base-layer NBFCs follow only general outsourcing rules; middle-layer and above must follow full IT-specific provisions. 2. Board-Approved Framework - NBFCs must have Board-approved policies for both financial and IT outsourcing, covering selection of activities, risk assessment, approval authority, performance monitoring, business continuity, and exit strategies. 3. Core Management Functions - NBFCs cannot outsource key functions such as internal audit, compliance, strategic functions, or decision-making like KYC approval or loan sanctioning. Limited outsourcing to group entities is allowed under strict conditions. 4. Due Diligence of Service Providers - NBFCs must assess financial health, competence, reputation, security controls, data protection, legal environment, stability, and concentration risks before entering or renewing outsourcing arrangements. 5. Outsourcing Agreements - Agreements must clearly define service standards, data confidentiality, audit rights, subcontractor controls, RBI?s inspection rights, termination clauses, business continuity, and the NBFC's access to all data and systems. 6. Monitoring and Annual Reviews - NBFCs must continuously monitor outsourced activities, maintain a central register of material outsourcing, conduct regular audits, and review the service provider's financial and operational capability at least once a year. For more information, please refer to the attached document.

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