Computerisation delay blocking Basel-II progress

The biggest impediment for public sector banks implementing Basel II norms is the slow pace of computerisation.

Banks in India have to comply with stringent Basel II prudential norms prescribed by the Bank for International Settlements by December 2006.

At the annual conference 'Indian banking: transformation to enhance competitiveness' organised by bank.net, V Chandrashekar, chief technology officer, Bank of Baroda, said: "The slow pace of computerisation is one of the biggest challenges most public sector banks face in the implementation of Basel II norms."

Currently Indian banks are ready to migrate to Basel II only at a conceptual or academic level. There is a need for organisational and technological readiness to actually go ahead with it, he said.

While there is a lot of enthusiasm to computerise the liabilities side, on the asset side, automation is done with a lot of reluctance. Banks also face a problem of distributed databases and controls, Chandrashekar added.

Banks would have to build entire information technology frameworks in order to comply with Basel II norms of providing capital based on credit risk, market risk and operational risk. This provides huge opportunities for consultants, vendors and for outsourcing activity.

"Real-time data capture, integration of internal and external data, datawarehousing, analysis and reporting and multiple views of massive data would all be prerequisites for Basel II," Chandrashekar said.

The biggest change on the technology front in the last decade has been the enormous potential for outsourcing available today, said H Srikrishnan, executive director, Yes Bank Ltd.

According to him, technology people need to participate in planning and budget making on an ongoing basis, which most often than not does not happen.

"The IT strategy needs to be embedded into the business strategy for the bank," he added.