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Despite the Indian industry being largely immune to the year 2000 bug, the banking sector will spend around Rs 5 billion to get the sting out.

Instead of fixing software for Y2K compliance, the Indian banking sector's strategy is to mostly replace all the hardware that simply isn’t equipped to recognise the last two digits of 2000.

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Banks have no other choice even if the investment required is likely to affect bottom lines badly. As the world slips into the next century mounds of data would be destroyed and entire systems would just stop working.

Though most changes would happen sometime in December 1999 preparations have already begun and some replacements are likely to take place this year itself.

The Reserve Bank of India has asked commercial banks to take urgent action and make their computer systems Y2K compatible.

In a recent circular to all banks, the RBI said, "it is a matter of importance for the banking sector to be addressed by the top management".

The RBI has also asked banks' chairpersons to ensure "similar necessary action" in the regional rural banks under their sponsorship.

"Banks’ compliance in tackling the millennium risk may be called for and followed up to its logical end," the circular added.

The RBI has asked banks to provide detailed information in this regard to the Department of Information Technology on a quarterly basis.

The banks are also required to make adequate provisioning in the current financial year for modification or replacement of existing hardware and software, sources said.

The Y2K problem arises because existing computer programmes denote a year as a two-digit figure - that is 1998 as just 98. "The practice was in vogue to save data storage capacity that was very costly till recently... However, with the coming of year 2000, most of these old programmes would fail to recognise 2000 as a valid year as the last two digits would ‘00’," explains another RBI circular.

It goes on to say, "the task before us is to scrutinise all the application programmes that denote the year as a two-digit entity and to take corrective action".

While investment in procuring Y2K compatible hardware may not be much, for the software, the banks may have to provide much more, a senior executive with PCS Computers said. PCS sells the bulk of its products to Indian banks and is currently offering Y2K-compatible computers.

However, the PCS executive said the State Bank of India, which is its largest customer, may need to invest over Rs 400 million in the current financial year to modify its old hardware.

- Compiled from the Indian media

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