Within the frame of corporate management in today's ever- changing financial world, there is the delicate task of taking firm decision or commitments. One of such is that of a firm concentrating efforts on particular skills or core business activities or service and letting others provide non-core services. A study of the situation in India provides an understanding of fear of the unknown or better still insecurity. Though, at the same time, commercial banks recognize some comparative advantage and cost benefits. Just like any other industry in India, Banking Industry is also influenced by the buzzword “Outsourcing”. Banks use of third party service providers is a business strategy that is being considered more frequently by financial institutions as they respond to an increasingly competitive marketplace. Bank which is outsourcing its financial services will have an impact on various parameters such as earnings, solvency, liquidity, funding, capital, customer satisfaction and risk profile. Due to fast developments in information technology, the Indian banking sector is outsourcing a good portion of their routine activities. Typically outsourced financial service include document processing, investment management, marketing and research, supervision of loans, data processing and back office related activities etc. Fully automated banking transactions are the outcome of the outsourcing initiatives in banking. In the run for more profits and productivity, banks try to reduce cost through outsourcing. Right from mobilization of deposits to the disbursal of loans, banks engage outsourcing agencies in different degrees. Given the scale and prevalence of these types of arrangements, outsourcing raises potential supervisory concerns. The failure to manage these risks can lead to financial losses/reputational risk for the bank and could also lead to systematic risks within the entire banking system in the country. It would therefore be imperative for the bank to outsourcing its activities to ensure effective management of these risks. This paper seeks to identify the reasons of competitive pressure and customer satisfaction in outsourcing particular to commercial banks in India, and its effects and what future directions might be. This study is a theoretical framework for decision making in outsourcing and further research on outsourcing and for improvement of knowledge.
Outsourcing, Corporate Management, Information Technology, Banking, Customer
