Rethinking Operational Resilience in Banks: Navigating RBI’s 2024 Guidelines
- May 14, 2025
- Blogs
- 5 min read
Last year, the Reserve Bank of India (RBI) released the Guidance Note on Operational Risk Management and Operational Resilience on April 30, 2024. This comprehensive document supersedes the earlier 2005 guidelines, reflecting the evolving nature of operational risks for modern digital banks.
This updated guidance aligns closely with the Basel Committee on Banking Supervision (BCBS)’s Principles for Operational Resilience, published in March 2021.
The new guidance document highlights the necessity for “regulated entities” to manage operational risks and build resilience against them. On reading the report, its evident that a key aspect of this resilience is observability—the ability to monitor, detect, and respond to issues in real-time across complex, interconnected systems. As banks integrate advanced technologies and expand their digital footprints, observability becomes important in ensuring uninterrupted service delivery and compliance with regulatory expectations.
As highlighted earlier, the RBI Guidance document is applicable to “Regulated Entities”. These entities include
1. Commercial Banks
2. Co-operative Banks (Central, State, Urban)
3. Financial Institutions (ex: Exim Bank, NABARD, NHB, SIDBI, and NaBFID)
4. NBFCs
Fig 1: Supervisory Authority for each “Regulated Entities”
Understanding the Responsibilities of the Board of Directors, Senior Management, and Business Units from an Operational Resilience Standpoint.
The report highlights three lines of defense when it comes to adherence to Operational Risk.
The Business Units become the first line of defense and have the inherent responsibility to identify and mitigate systemic risks that can happen within banks’ products or services. More importantly, the board plays the critical role of the third line of defense that independently reviews and allocates appropriate resources so that critical systems are equipped for success.
In the table below, we highlight the key responsibilities of each role when it comes to Operational Resilience
Responsibility Area | Board of Directors | Senior Management | Business Unit Heads |
Operational Resilience & ORM Framework Approval | Approve the framework and ensure alignment with RBI guidelines and industry best practices | Develop and translate the framework into policies and monitoring standards | Implement a framework within business units and align monitoring accordingly |
Risk Appetite & Impact Tolerance Definition | Approve risk appetite and impact tolerance metrics for critical operations | Establish and operationalize impact tolerance metrics (RTO, RPO, SLA, etc.) across services | Define and monitor impact tolerances for critical processes, ensure reporting of deviations |
Critical Operations Identification & Mapping | Review and approve criteria for the identification of critical operations and dependencies | Ensure cross-functional and cross-entity mapping of critical operations, interconnections, and dependencies | Map business-specific critical processes, systems, and third-party dependencies |
Incident Management Governance & Oversight | Ensure a robust incident management process, review significant incidents, and lessons learned | Oversee end-to-end incident lifecycle, ensure escalation, reporting, and analysis dashboards | Operate incident detection, classification, and response playbooks; execute and report incidents |
Real-time Monitoring & SLA Management | Approve service level expectations and thresholds for critical operations | Define enterprise-wide SLAs, KPIs, monitoring dashboards, and ensure visibility at a leadership level | Operate observability tools, track service performance, manage alerts, and ensure SLA adherence |
Third-Party Dependency Monitoring | Ensure third-party risk management policies cover resilience and SLA monitoring | Establish a third-party risk monitoring, SLA adherence, and reporting framework | Monitor daily performance and SLA of third-party services, and escalate issues |
Business Continuity Planning & Testing | Approve and review BCP strategies, ensuring alignment with impact tolerance and resilience objectives | Lead BCP scenario planning, testing, and ensure integration with observability and incident management tools | Conduct BCP drills, participate in scenario-based tests, and validate readiness through monitoring dashboards |
Lessons Learned & Continuous Feedback | Review major incidents’ learnings, ensure adjustments to strategy, and impact tolerances | Lead root cause analysis, ensure feedback loops are integrated into monitoring configurations, and update playbooks | Implement feedback into daily monitoring configurations, dashboards, and response processes; share local learnings with central teams |
Training, Awareness & Culture Building | Approve organizational training and awareness initiatives for resilience and monitoring culture | Ensure staff and BUs are trained on observability tools, monitoring KPIs, and incident response processes | Train the team on BU-specific observability dashboards, incident playbooks, and BCP responsibilities |
The Imperative of Observability in Operational Resilience
In the wake of the COVID-19 pandemic, the banking sector in India has undergone a significant digital transformation. The accelerated shift towards digital banking services has led to increased reliance on third-party providers, including fintech companies, cloud service providers, and API-based integrations. This interconnected ecosystem, while offering enhanced services and operational efficiencies, has also introduced new vulnerabilities and complexities in managing operational risks. The report acknowledges this development and highlights a few concerns from the perspective of reliability.
Key Observability Components Highlighted by RBI
- Comprehensive Mapping of Interconnections and Interdependencies: Identifying and documenting the intricate web of internal and external interconnections that support critical operations. This mapping facilitates a holistic understanding of potential vulnerabilities
- Establishment of Impact Tolerance Metrics: Banks must define clear impact tolerance levels for their critical operations. These metrics, which can be time-based, volume-based, or service-level-based, quantify the maximum acceptable level of disruption. Such quantification aids in setting thresholds for monitoring systems to trigger alerts when tolerances are breached.
- Integration of Incident Management with Monitoring Systems: The guidance emphasizes the need for robust incident management frameworks that are tightly integrated with observability tools. This integration ensures swift detection, classification, and response to incidents, minimizing potential impacts on operations.
- Continuous Monitoring and Feedback Loops: Institutions are encouraged to implement continuous monitoring mechanisms that not only detect anomalies but also facilitate feedback loops. These loops enable organizations to learn from past incidents, adapt their strategies, and enhance their resilience over time.
- Third-Party Dependency Monitoring: Given the reliance on third-party service providers, banks must monitor the performance and resilience of these external entities.
How vuSmartMaps™ Can Help Banks Stay Ahead?
Embracing Operational Resilience in 2025
The RBI guidance note on Operational Risk Management and Operational Resilience is a necessary focus in the regulatory landscape, acknowledging the dynamic transformation in the past few years. As digital banking ecosystems become increasingly interconnected, end-to-end visibility into critical systems becomes non-negotiable.
We like to believe that platforms like vuSmartMaps™ play a crucial role in this transformation. The focus on real-time monitoring, incident management, and third-party dependency tracking helps banks proactively address disruptions, maintain service continuity and uphold customer trust.
As the financial sector continues to evolve, embracing such advanced observability solutions will be instrumental in achieving operational resilience, ensuring compliance, and fostering a robust, customer-centric banking environment.
Table of Contents
- Understanding the Responsibilities of the Board of Directors, Senior Management, and Business Units from an Operational Resilience Standpoint.
- The Imperative of Observability in Operational Resilience
- Key Observability Components Highlighted by RBI
- How vuSmartMaps™ Can Help Banks Stay Ahead?
- Embracing Operational Resilience in 2025
