In the banking sector, eight banks--including private and foreign banks-- are yet to achieve Y2K compliance. "This is a serious matter and RBI is providing all kinds of assistance to these banks for Y2K compliance," chief general manager (department of information technology, RBI) S R Mittal who is supervising the financial sector's readiness for the Y2K bug said.

While 19 commercial banks have already achieved Y2K compliance, 77 others are expected to be Y2K compliant by the March 31 deadline, RBI sources said. "NBFCs have been asked to achieve Y2K readiness, failing which their licences will be cancelled," Mittal said.

Banking sources added that the RBI has alreadyconstituted a working group under deputy governor SP Talwar to monitor the financial sector's response to the situation and strict penalties have been envisaged for non-compliance.

NBFCs are one of the biggest category where the reality of the Y2K problem has not penetrated, Mittal said adding that none of the NBFCs with asset base less than Rs 100 crore were ready for the millennium bug. "We are directly monitoring the NBFCs and to date 75 of those with asset base above Rs 100 crore have stated their compliance with another 25 following suit by March-end," he said.

"Banks too will have to face equally stringent penalties if they fail to satisfy the RBI on steps being taken for a smooth transition into the next millineum. Besides monetary penalties, the banks which fail to adhere to the deadline could have their call money market, securities trading and clearing house activities suspended," he said.

Other enforcement measures include restraining branch expansion and enforcing higher capital risk toasset ratio on such banks, Mittal added.

To cope with the problem, the RBI has also set up contigency measures to ensure business continuity. Banking sources added that RBI has asked banks to maintain cash levels at the busy season levels around December 31, 1999 to meet any sudden demand for cash and the 4200 currency chests with State Bank of India and its associate banks will also be monitored to augment supply of cash to all bank branches across the country.