A survey conducted by Oracle India, i-flex solutions and the Indian Banks’ Association (IBA) has revealed that a majority of Indian banks plan to build comprehensive risk management systems while progressing on their Basel II compliance initiatives. The survey sought to understand the challenges that Indian banks faced on the road to Basel II compliance. The Reserve Bank of India (RBI) recently extended the Basel II compliance deadline from 31 March 2007 to 31 March 2008, to provide banks with more time to put in place appropriate systems in order to ensure full compliance of the Basel II guidelines. A notable finding of the survey was that all surveyed banks viewed this postponement as an opportunity to adopt a holistic approach to Basel II compliance, rather than slackening the pace of adoption. Indian banks are now planning for Basel II implementation under all three Pillars of Basel II, while addressing gaps in the implementation of Pillar I, such as the credit risk mitigation process and portfolio segmentation process for retail exposures, etc. Ninety-four per cent of the bankers surveyed cited process standardization, cost control, standardizing and storing data, and acquiring the necessary skill sets, as the primary challenges to Basel II compliance. Of these, public sector banks and private banks rated process standardization as their primary concern, while foreign banks and co-operative banks rated cost control as their primary concern. The survey also found that one of the key challenges for Indian banks in adopting the standardized approach was data management. Most public sector banks are still in the process of rolling out core banking solutions across their branches, and the standardization of data residing in myriad systems across various branches is proving to be challenging. Responses from private sector banks indicate an advantage of ‘up-and-running’ core banking solutions, but these banks have to grapple with issues of process standardization.
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