Question
Which of the following financial activity can be outsourced by an NBFC?
Read the following passage and answer the next 2 question Outsourcing' is defined as the NBFC’s use of a third party (either an affiliated entity within a corporate group or an entity that is external to the corporate group) to perform activities on a continuing basis that would normally be undertaken by the NBFC itself, now or in the future. NBFCs have been outsourcing various activities and are hence exposed to various risks Further, the outsourced activities are to be brought within regulatory purview to protect the interest of the customers of NBFCs and to ensure that the NBFC concerned and RBI have access to all relevant books, records and information available with service provider. Some key risks in outsourcing are Strategic Risk, Reputation Risk, Compliance Risk, Operational Risk, Legal Risk, Exit Strategy Risk, Counterparty Risk, Country Risk, Contractual Risk, Access Risk, Concentration and Systemic Risk. It is therefore imperative for the NBFC outsourcing its activities to ensure sound and responsive risk management practices for effective oversight, due diligence and management of risks arising from such outsourced activities.Solution
Typically outsourced financial services include applications processing (loan origination, credit card), document processing, marketing and research, supervision of loans, data processing and back office related activities, besides others. NBFCs which choose to outsource financial services shall, however, not outsource core management functions including Internal Audit, Strategic and Compliance functions and decision-making functions such as determining compliance with KYC norms for opening deposit accounts, according sanction for loans (including retail loans) and management of investment portfolio .
More Banking System in India Questions
- Under PMKVY, what is the maximum monetary reward a trainee can receive upon successful certification?
- Pradhan Mantri Ujjwala Yojana was launched in _______ as a flagship scheme to make clean cooking fuel such as LPG available to rural and deprived household...
- Which among the following is the correct formula for value of right under the rights issue?
- Consider the following Statements and choose the option with correct Statements. I- Pradhan Mantri Awaas Yojana –Gramin (PMAY-G) was launched in 2016. II- ...
- What is the Fully Accessible Route (FAR) introduced by the Reserve Bank of India?
- In the revised instructions on foreign exchange risk hedging, what is the maximum exposure a user is allowed to take across all recognized stock exchanges ...
- Which of the following system enabling the citizens of the country to utilize any ATM of a connected bank?
- Which of the following is an alphanumeric code that facilitates electronic funds transfer in India?
- “Revenues and expenses must be recorded in the accounting period in which they were earned or incurred, no matter when cash receipts or outlays occur”. Thi...
- XYZ Ltd. is planning a private placement to raise capital and is considering including the following groups: a. 40 identified individuals. b. 20 qualified ...
