Banks should be ready to scale up investments in technology as legacy core banking systems will not be adaptable in the ever-changing technological landscape, Reserve Bank of India (RBI) deputy governor MK Jain said.
“This is crucial in today’s technology-led dynamic environment. The financial sector will have to anticipate and prepare for potential future requirements,” Jain said at an event organised by the National Institute for Banking Studies and Corporate Management.
The RBI had earlier highlighted the operational risks posed by the aggressive collaboration between Big Tech and financial institutions. Separately, the central bank has also issued draft guidelines on outsourcing of technology solutions by lenders to IT companies.
Lenders and financial institutions will have to continuously innovate in technology for capacity building, he said, adding that banks must collaborate to leverage technology for reducing costs and maximising revenues while ensuring data privacy, Jain said. The account aggregator framework is aimed at bridging this gap, as it allows sharing of data between individuals and financial institutions.
Several banks are already taking initiatives in big data analytics, but they need to build capacities in technology, analytical abilities and human resources to harness big data, Jain said.
Citing the example of agricultural loans, which were digitlised on a pilot basis, Jain said there has been a substantial reduction in turnaround time and costs. The RBI had earlier launched digital KCC loans in some districts of Madhya Pradesh and Tamil Nadu on an experimental basis.
The RBI had also launched a web-based workflow application, Daksh, aimed at monitoring of compliance by banks and other financial institutions. The platform uses advanced analytics, AI and ML to assess various systemic and specific risks.