Circulars/Notifications - Banking Policy & Regulations Department  
 BPRD Circular No. 06 of 2017
June 20, 2017

The Presidents/Chief Executives,
All Banks/DFIs/Microfinance Banks

Dear Sir/Madam,

Framework for Risk Management in Outsourcing Arrangements by Financial Institutions

      Please refer to the ‘Guidelines on Outsourcing Arrangements’ issued vide BPRD Circular No. 09 dated July 13, 2007.

2.  Since the issuance of above Guidelines; the Banks/ DFIs/MFBs are increasingly using third party service providers to carry out their various activities, functions and processes under the ambit of these Guidelines. This, however, has increased their dependence on third parties and consequently their risk profile.

3.  State Bank of Pakistan, with the objective to enable FIs to effectively manage the risks arising out of outsourcing arrangements, has revised the ‘Guidelines on Outsourcing Arrangements’. The revised instructions (Annexure ‘I’) shall be termed as “Framework for Risk Management in Outsourcing Arrangements by Financial Institutions”.

4.  Henceforth, all new outsourcing arrangements by FIs shall be governed under this framework. The FIs while deciding to outsource any function, activity or process, shall ensure that outsourcing neither effects the protection available to depositors or investors under the existing legal framework nor the same shall be used to avoid compliance with the regulatory requirements. Further, the FIs shall ensure that their existing outsourcing arrangements would be aligned with this framework latest by June 30, 2018.

5.  The FIs are advised to ensure meticulous compliance of these instructions as any non-compliance shall be dealt with in accordance with the relevant provisions of law.

6.  Please acknowledge receipt.

Encl: Annexure -I

Yours truly,


(Mahmood Shafqat)
Head of Department (A)

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