Reliance on third-party technology providers requires robust risk management practices by banks: RBI DG Jain
Banks must carefully manage the adoption of new technologies and ensure appropriate controls and safeguards to address potential vulnerabilities, according to Deputy Governor of the Reserve Bank of India MK Jain.
In addition, reliance on third-party technology providers requires strong due diligence and risk management practices to mitigate the risks associated with outsourcing.
Banking is undergoing a major technological revolution, driven by the emergence of financial technology companies. This is driving traditional banks to embrace digital transformation and become agile and innovative.
Jane said on the 25thy SEACEN-FSI Conference of Directors Stewardship of Asia Pacific Economies in Mumbai.
Data privacy
The Deputy Governor noted that the issue of data is closely related to technology.
The banking industry, by the nature of its business, has a wealth of data that can be leveraged for various purposes. This data covers customer information, financial transactions, credit history, and more.
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“While there are significant opportunities to derive value from this data, it is critical to recognize and address the inherent risks associated with its processing, including those related to data breaches and privacy concerns,” Jain said.
The deputy governor emphasized that supervisors need to study IT issues comprehensively.
Proof of the future
“It is critical to determine whether banks have the capacity to develop robust IT systems that align with their business strategies. Banks’ future-proof IT infrastructure has become imperative, necessitating strategic investments in both capital and operating expenditures.
“As virtualized work environments and cyber risks become more prevalent, effective IT governance is taking increasing notice,” he said.
He emphasized that data analytics enables supervisors to be able to extract valuable insights from massive amounts of data.
This enables them to make data-driven decisions, identify risks, and take timely action to protect financial stability.
“By leveraging the power of data analytics, bank supervisors can greatly enhance their supervisory frameworks,” Jin said.
The deputy governor said that as banks adopt new technologies, it is imperative that supervisors be equipped with the necessary knowledge, skills and resources to effectively oversee and regulate these developments.