Cloud Infrastructure for Banks: RBI’s Initiative

Governor Shaktikanta Das of RBI recently announced plans to introduce cloud technology in the financial sector. This would help to tap the potential available from the large volumes of data collected by banks and financial entities. This initiative focuses on three main things - data security, integrity, and privacy. This will ensure more scalability and business continuity. The adoption of cloud technology will facilitate higher scalability and accommodate the increasing volumes of data. It also ensures smoother business operations during any calamity. The integration of the cloud into the financial sector portrays the commitment of RBI to using technology to improve efficiency. This will also lead to regulatory frameworks and guidelines specific to cloud usage, helping the financial institutions to manage and store data, and adapt to specific industry practices and compliance standards.

As per Accenture’s report, the percentage of total workload in banking that has migrated to the cloud is 7% in the growth markets, 12% in the North American region, and 5% in Europe. This adoption is mainly happening because of the benefits that cloud technology can provide. Firstly, it allows the democratization of technology. Banks of all sizes can access the technology without having to pay heavily, and they can use AI, ML, and natural language processing. Secondly, it can help to launch products faster into the markets. With the help of dynamic infrastructure, digital programs can be launched/delivered faster. Thirdly, banks can save on infrastructure costs with the help of the cloud. Fourthly, the API ecosystem and advanced analytics will unfurl opportunities such as real-time accounts reconciliation and liquidity management. Cloud provides better data security and keeps the system running, no matter what. Further, the cloud enables 24*7 services and support to clients and customers. Cloud also offers backup at a low cost.

It is seen that most larger banks prefer to run hybrid private or public cloud. They don’t want their information to be public, and also, they prefer having more control over their data. On the other hand, the smaller and mid-sized banks are moving towards public cloud, because it allows them to buy the technology on a pay-as-you-go basis. Here, RBI has to prioritize whether to shift to public, private or hybrid cloud technology.

There are certain success factors or incentives for banks to move to the cloud. Along with the technology, the skills and the people involved must also evolve to get the full benefit out of this transition. There is no one-size-fits-all solution. Every bank can have its cloud designed for services as per its demand and requirements. This will help banks to save on unnecessary costs and reduce the burden of managing the infrastructure. Managing will be done by the cloud company itself. Hence, banks can focus on their core activities. Ensuring the right security and risk partners throughout the designing, prioritization and execution stages is equally important. Lastly, banks should constantly manage consumption, capacity, performance, and cost. All these require a unique set of skills and operational functions. Banks have to ensure these to be successful.

RBI states that the cloud facility will be initially set up and operated by Indian Financial Technology and Allied Services (IFTAS). This is a wholly-owned subsidiary of RBI. Eventually, this facility will be transferred to a separate entity owned by the financial sector participants. RBI’s Deputy Governor T Rabi Sankar elaborated that data storage and data processing efficiency are the major issues. The idea is to ensure the security, integrity, and safety of data. It has nothing to do with data sovereignty, he said. This move will help the industry to become more efficient and will foster innovation. Thus, this initiative of RBI will prove to be a crucial pillar for the banking and financial services industry.

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