"The country will be faced with major problems and there will be a crisis of confidence and liquidity if Y2K issues are not complied with," RBI deputy general manager, M Sebastian, said here. In his opening remarks at a seminar on `year 2000 (Y2K), organised by the Indian Banks' Association (Bangalore local chapter), Sebastian said Y2K was the major challenge confronting the banking sector today.

Most commercial banks in india were in an advanced stage regarding Y2K compliance, but a continuous testing programme was needed to make it foolproof, he said.

Maintaining that Y2K had a `pervasive nature,' Sebastian said it was not a technical but a business issue, which needed to be addressed from the highest level.

"Board of directors need to review Y2K compliance once in two months and all aspects, including credit, legal andtechnical aspects, should be addressed,' he emphasised.

Sebastian cautioned banks that major customers might shift accounts if they were not Y2K complaint, adding, a high-level steering committee of the RBI was supervising the compliance efforts. Sebastian said the RBI had suggested to the banks that they factor in Y2K risks in the credit appraisal system itself.

The RBI had initiated enforcement measures and apprised banks on the steps to be taken on compliance, he said and emphasised the need to renovate, replace and upgrade systems in this regard.The RBI had also issued guidelines to banks on the need to validate the systems, have a contingency plan ready and to document them.

In his inaugural address, RBI's regional director for Karnataka and chief general manager, PK Biswas, explained the steps taken by RBI to solve Y2K problems.Vijaya Bank chairman and managing director, V Leeladhar has also expressed his views on Y2K.

Meanwhile, IBA said the seminar had been organised for the benefit of thecustomers of its member banks.

"The purpose is to keep customers aware of the Y2K issues and inform them of the preparedness of the bankers to tackle the issues so that the problems in this connection will not affect the banking transactions,' IBA said.