Bankers said that public sector banks will face profitablity problems as they generally have a huge unreconciled debit positions for nostro accounts.

The RBI has also directed public sector banks to show net debit or credit position on nostro accounts in the bank's accounts for the year 1999-2000. The issue of reconciliation of these accounts has been hanging fire for quite a few years with the apex bank and has now been resolved.

The move comes after the report on the working group set up to look into the system of reconciliation of nostro accounts submitted its recommendations in January. The RBI has decided that as a one time measure banks will have to adopt the new netting procedure afterundertaking an inspection of their books by internal auditors and after getting the proposal placed before their respective boards before implementation.

In a recent circular, issued by the departement of banking operation and developement (DBOD), the RBI has said that PSBs which have already trasnferred unreconciled debits to profit and loss accounts should not write back the same amount to the respective account in order to carry out the netting excercise.

The RBI has laid down a guidelines for the netting off process to take off. "In respect of the entries pertaining to the period upto March 31,1996 and remaining unreconciled as on March 31,2000 the credit entries in each nostro account may be netted against the debit entries in the respective mirror account. Likewise the debit entries in each nostro account may be netted against the credit entries in the respective mirror account", the circular says.

It adds that the net debit or net credit position as the case maybe in each nostro account maytherafter be computed. "The accounts showing net debit position and the accounts showing net credit positions may be aggregated seperatly taking care not to set off the net debit position in an account with a net credit position in another account and vice-versa. The net debit and net credit position should be reflected in the bank's accounts for the year 1999-2000 by transferring the aggregate net debit to profit and loss account and the aggregate net credit to sundry creditors account", the RBI said.

The central bank directive also adds that the unreconciled credit entries in the nostro and mirror accounts for the period from April 1,1996 onwards and outstanding for more than three years mary be segregated and kept in an account like Unclaimed deposit account.