RBI issues directions to regulate outsourcing of key functions by NBFCs RBI lists 10 types of risks arising out of outsourcing that the NBFCs need to mitigate The Reserve Bank of India (RBI) on Thursday prohibited non-banking financial companies (NBFCs) from outsourcing key functions such as internal audit, investment portfolio management, loan sanction, and know-your-customer compliance.“The failure of a service provider in providing a specified service, a breach in security/confidentiality, or non-compliance with legal and regulatory requirements by the service provider can lead to financial losses or loss of reputation for the NBFC and could also lead to systemic risks,” the central bank notification said, adding that NBFCs outsourcing their activities should ensure sound and responsive risk-management practices. The regulator listed 10 types of risks arising out of outsourcing that the NBFCs need to mitigate. “Some key risks in outsourcing are strategic risk, reputation ris