The official declined to be identified.

The Y2K or millennium bug problem arises from a programming technique in older computers that used only two digits to denote years when keeping track of dates. Experts fear this could cause some systems to malfunction if they misinterpret 2000 as 1900. The RBI will provide details on the financial sector's compliance on its website by the end of the month. The central bank official said international concerns on India's preparedness for the millennium bug were over blown and arose from a faulty understanding of the system. Foreign fund flows into India and other emerging markets have been hit recently by concerns the country may not be adequately prepared for the millennium year changeover. "Globally, developed countries which are taking a pro-active role are trying to apply the same yardsticks as they apply to automated money markets. India is not an automated money market," the official said. The central bank had adopted Bank for International Settlements' standards to evaluate the system's preparedness,the official said.

"Here there are no online interfaces for any institution. Indian clearing houses are still stand-alone settlement houses. There is no networking in Indian money markets." Some institutions in the financial sector were non-compliant but they posed no risks to the system, he said. "The system has other players but they don't participate in the settlement process and have to use banks."

The official said the central bank had also upgraded its own systems, particularly those in its clearing houses. "We didn't go to rectify them. We replaced them totally. A new IBM system is functioning in the Bombay clearing house."