The Reserve Bank of India has formulated a seven-point plan for attaining full compliance with the year 2000 (Y2K) problem in the financial sector. The central bank has said that it will take penal measures against erring banks if need be and will carry out on-site supervisory examinations for verification of compliance efforts by banks.

Banks will have to furnish a certificate of compliance and the statutory auditors will comment on the process followed by banks for this purpose. Banks will also have to furnish their contingency plans and give their compliance positions on web sites apart from tackling cross-border issues.

Commencing October 1, 1998,banks have been advised to continuously validate their renovated systems through testing and to identify alternate approaches, if need be. Testing is required to be done with reference to critical dates relevant for Y2K testing.

The RBI has also asked non-banking subsidiaries of commercial banks, financial institutions, cooperative banks, regional rural banks and non-banking financial companies to ensure Y2K monitoring and compliance. Each bank has been advised to constitute an internal core group and the progress is to be monitored regularly by the top management and the board of directors.

The Indian Banks Association (IBA) has also been conducting periodic reviews for the Y2K problem for the banking industry and coordinating with infrastructure agencies and trade bodies. A public awareness campaign was also initiated by IBA by highlighting in various newspapers the millennium bug problem and the need to resolve it well in time.

A high-level working group with members drawn from the banking,regulatory, supervisory and information technology departments in the RBI, representatives of IBA, commercial banks and the National Institute of Bank Management (NIBM) was constituted by the central bank earlier this year. The working group reviews the progress made by banks, their subsidiaries and financial institutions on a monthly basis.