In a latest judgment, the RBI has decided that banks which would be outsourcing their business would have to follow a comprehensive set of rules. The RBI has already notified the banks with regards to the guidelines on outsourcing.
RBI is worried that banks have been undertaking a number of outsourcing activities and this has put them to a lot of risk. Though boards of the respective banks would have a say in selection of service provider but RBI would command powers for inspecting the records of the service provider.
As per the new rules, service providers would be required to maintain customer confidentiality even after termination of the contract with the bank.
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Recently, one of the many company failures that was looming was that of the investment giant Merrill Lynch, which was sold to Bank of America to avoid bankruptcy. The company had run almost completely out of operating cash in the wake of the sub prime mortgage collapse, and was heading towards bankruptcy after almost a hundred years of operation. According to a recent Wall Street Journal article, CEO John Thain was asking for a $10 million bonus after the sale of the company. Now, his reasoning for the bonus is that because he sold the company, he therefore avoided bankruptcy. Let me put another way: he failed to run the company he was hired to run in such a manner that was profitable, and ultimately had to sell it to a larger firm in order for it to survive. The New York Attorney General called his request ”nothing short of shocking” and it is definitely an act of great hubris. Now, if the rest of us fail in our duties to our employer, we get reprimanded, or even fired. Thain seems to think he should get a raise! If you have a sudden emergency that needs financing short term, don’t sell yourself to Bank of America – you can check out options like payday loans.
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