Mumbai, Apr 1: The Reserve bank of India is likely to give "case by case" extention on Y2K complaince to the eight public sector banks which have not been able to meet the March 31 deadline.While all private and foreign banks have become Y2K compliant, eight PSBs have fallen short of compliance. The Reserve Bank declined to give the names of the banks fearing a run on their deposits.
Banking sources said that the Reserve Bank has called all the eight banks to explain why they have not been able to meet the deadline. "There might have been problems from the vendor front--which has happened in the case of at least three banks. We will look into each case. If we are convinced that there is a genuine reason for not being able to meet the deadline, we will give them some more time. Those banks which are not making extra efforts to be Y2K compliant will be penalised," sources said.
"If the banks are not able to meet the deadline because of problems outside their control we will extend the deadline. As regardto vendor problems, we will take up the matter with the department of electronics," RBI sources said.
The central bank has been insisting on a contingency plan from the banks to meet Y2K induced breakdown. "Banks are expected to complete this excercise by March 31, 1999 and forward to us a copy of their contingency plans duly approved by their board of directors," the RBI letter, sent to bank chiefs, said.
RBI had in February decided to enforce stiff measures including hiking of capital adequacy, restriction on branch expansion and suspension from the call money and the debt market on banks that fail to comply to Y2K requirements by March 31.
The central bank's communication said that while specific course of action would be decided by the RBI taking into account the findings of the on-site inspections and information contained in the monthly reports submitted by banks, the enforcement measures may include one or combination of the following:
issue supervisory letter ofcaution;
Impose higher CRAR;
Impose monetary penalties on a graduated scale as may be decided on a case by case basis;
Restricting expansionary strategies of banks like opening branches, subsidiaries;
Y2K compliance will be an overriding criterrion while evaluating the performance of the chairman/managing director/chief executive;
Suspension from participation from call money markets, clearing securities trading. The apex bank had emphasised that the responsiblity to appropriately addrss the Y2K problem within each institution, its subsidiaries and external linkages or interfaces would solely rest with the top management and board of directors."In view of the crucial nature of the problem and its likely impact on the business of banks, it is expcted that banks will rview their compliance strategies to make their system 2k compliant and develop appropriate contingency plans well before the March 31, 1999 deadline", the RBI letter stated.
Copyright ©1999 Indian Express Newspapers (Bombay) Ltd.
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