Reserve Bank of India (RBI) just slapped HDFC Bankwith a Rs 91 lakh penalty (order dated Nov 18, 2025) for outsourcing KYC compliance to third parties—a core function that’s strictly off-limits under RBI’s ironclad guidelines for banks and NBFCs.
This isn’t just a slap on the wrist; it’s a stark reminder that regulatory lapses in outsourcing can cost you big—both in fines and reputational hits.
- Never outsource core functions like KYC decisions, internal audits, or regulatory reporting to unregulated third parties. RBI’s outsourcing guidelines are non-negotiable.
- Board-approved outsourcing policy is a must: Vet vendors rigorously for RBI alignment, retain full oversight, and ensure SLAs cover compliance handoffs. HDFC’s outsourcing of KYC verification to agents crossed the line.
- Align with DPDP Act 2023 for data privacy—RBI now cross-references this in fintech audits, and mishandling sensitive customer data via outsiders amplifies risks.
In cross-border ops (e.g., overseas lending), secure RBI nod for forex compliance; residents can’t solicit foreign deposits without approval. One wrong move, and you’re in HDFC’s shoes.
Audit your outsourcing setup NOW. Draft/update your policy by December 2025—include ironclad SLAs for compliance. Don’t wait for RBI’s knock.
Fintechs, banks, NBFCs: Compliance isn’t optional—it’s your shield. What’s your biggest outsourcing headache?
NBFC Advisor GenZCFO
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