Banking · Risk Management and Regulation
A large private sector bank in India plans a retail delivery overhaul, introducing Digital Banking Units (DBUs), appointing Business Correspondents (BCs), launching a localized multi-lingual app, and establishing a Banking as a Service (BaaS) partnership with an agri-tech startup. The Chief Risk Officer (CRO) raises concerns about Operational Risk, Compliance Risk, Data Privacy, and Identity Theft associated with the BC and BaaS channels. Given this expansion strategy, what is the most critical regulatory factor the bank must satisfy to ensure compliance and mitigate systemic risks?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The bank must stop using the mobile app and focus only on the 10,000 BCs as they are the only ones who can build trust in rural areas.
- 2The bank should ignore the CRO's concerns as the profit from the 5 million farmers will easily cover any potential fines from the RBI.
- 3The bank must establish a comprehensive 'Outsourcing Policy' and 'Risk Management Framework' that ensures direct oversight of BCs and BaaS partners, including mandatory periodic audits and a centralized grievance system.✓
- 4The bank must ensure that all its 3,000 urban branches are renovated to look like the new DBUs to maintain brand consistency.
Correct answer
The bank must establish a comprehensive 'Outsourcing Policy' and 'Risk Management Framework' that ensures direct oversight of BCs and BaaS partners, including mandatory periodic audits and a centralized grievance system.
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