"NBFCs have been asked to achieve Y2K readiness, failing which their licences will be cancelled," chief general manager, department of information technology, RBI, S R Mittal who is supervising the financial sector's readiness for the Y2K bug said at a seminar on Y2K recently.

The RBI has constituted a working group under a deputy governor to monitor the financial sector's response to the situation, he said adding that strict penalties have been envisaged for non-compliance.

"Besides monetary penalties, banks which fail to adhere to the deadline could have their call money market, securities trading and clearing house activities suspended," he said.

Other enforcement measures include restraining branch expansion and ensuring maintenance of CRAR (capital risk to assetratio), Mittal added.

NBFCs are one of the biggest category where the reality of the Y2K problem has not penetrated, Mittal said adding that none of the 7523 NBFCs with asset base less than Rs 100 crore were ready for the millennium bug.

"We are directly monitoring the NBFCs and till date 75 of those with asset base above Rs 100 crore have stated their compliance with another 25 following suit by March," he said.

While 19 commercial banks have already complied, 77 others are expected to be Y2K ready by March 31, according to a RBI report. Eight banks, including private and foreign banks are yet to achieve Y2K-compliance.

Among 1836 urban co-operative banks, 930 are yet to state their level of compliance, the report said. "We expect 74 per cent of the financial sector to be already equipped for the D-day," Mittal said adding that the time for creating awareness was long spent.

The financial sector is most prone to the Y2K bug with its level of computerisation and daily transactions and has set thealarm bells ringing in the RBI.

To cope with the problem, the RBI has also set up contingency measures to ensure business continuity, he added. "We have asked banks to maintain cash levels at the busy season levels around December 31, 1999 to meet any sudden demand for cash," Mittal said.

The 4200 currency chests with State Bank of India and its associate banks will also be monitored to augment supply of cash to all bank branches across the country.