Financial Daily from THE HINDU group of publications
Thursday, Jan 08, 2004
Money & Banking
Banks not equipped fully to handle online clearing
Mumbai , Jan 7
COMMERCIAL banks in the country seem unprepared to handle the RBI's new technology platform - RTGS, the online clearing and settlement system.
The Fixed Income Money Market and Derivatives Association of India (FIMMDA), on behalf of banks, plans to suggest a delayed implementation and wider test runs for RTGS.
The Reserve Bank of India (RBI) is to give out a set of ground rules regarding Real Time Gross Settlement (RTGS) and start the live run of the system in the third week of January. While some banks have not yet got the requisite hardware and software in place others feel that the third week of January is too early to do a live run and are unprepared for the same.
FIMMDA will have meetings with the RBI in the coming week and is planning to suggest a test run across banks for hands on experience.
"Currently test runs are being conducted in four banks and only they have benefited from the learning. The testing should perhaps be extended to more banks and should be held for at least 10-15 days. We are not ready to go in for a live run in the very beginning as the RBI wants," remarked a senior banker. Test runs are being held at State Bank of India, Standard Chartered Bank, HDFC Bank and Saraswat Bank.
"The biggest problem across banks at the moment is that nobody is able to anticipate the kind of changes that will come with the implementation of this superior technology,'' said the treasury head of a large State-run bank.
The apex bank has been holding training sessions for operations and technical personnel from banks since the start of this month. But merely training a few people from each bank on mock systems will not help create adequate preparedness, said a senior bank official.
There is a lack of clarity on what kind of accounting practices that will have to be followed for each transaction. "Will there be a uniform pattern across banks for making intra-day accounting entries,'' asked a treasury head of a bank. Whether there will be restrictions on usage of the proposed intra-day liquidity facility and the level of its computerisation are all grey areas. The intra-day liquidity facility is a new tool, which will assist banks to meet their liquidity needs on a minute-to-minute basis.
The RBI has, in discussions with bankers, said that the RTGS system will be ready for inter-bank fund transfers and for customers' transactions by third week of January and banks can join it as and when they are ready. "The new products for customers' fund transfers through RTGS are on the drawing board still. How can we introduce the products until RBI releases the ground rules for RTGS,'' said a banker.
According to bankers, another big issue will be the lack of legal sanctity of RTGS. "Unlike cheques in today's times which come under the Negotiable Instruments Act, what will RTGS come under?,'' asked a banker.
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