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Journalism of Courage
BANGALORE, DEC 7: “When depositors see that their money may disappear in the scrambling of banks’ computers, they will go down and demand payment in cash. On that day, the mother of all bank runs will begin. It will spread to every bank on Earth,, – Gary North, self professed Y2K Guru.
Gary North is seen as a crank by the financial community, and he in all probability is one. But as D-Day nears, he’s being taken more and more seriously because his website on which he predicts financial apocalypse this New Year’s eve is one of the more popular Y2K-related sites.
According to estimates, even if 10 per cent of a bank’s depositors clean out all the money in their accounts, the bank will collapse because it just doesn’t have the cash to give them. And since every bank is dependent on the other, a clean-out in some corner of the world could trigger a worldwide collapse.
What most banks have started worrying about now is not what the Y2K bug can do, but what would happen if depositors panic and beginto withdraw their cash. One or two banks in Bangalore have already issued circulars to their valued customers with an underlying “do not panic” message.
Vijaya Bank’s credit card division has put out an elaborate reassuring message that aims to boost cardholder confidence. “Withdraw minimal holiday cash. For the New Year’s weekend, only take out as much cash as you would for any other weekend. The safest place for your money is your account.”The fact is that banks are doing everything to beat the bug. On the night of December 31 when the world celebrates, banks will be on their collective toes ready to tackle the glitch. Since January 1 is a Saturday, followed by Sunday, banks have two days to “clean up” before opening for business Monday. Most experts believe, and hope, January 3, will be like any other working day.
Preparations for the day of the bug started several years ago. ICICI bank, for instance, initiated its Y2K project in June 1997, which meant making corrections after detailed analysisof its hardware and software.
So is it risk free now? No, says its website. While vigourous action has been taken to ensure Y2K compliance in internal systems, the bank functions in an environment of complex inter-dependence. Y2K problems in any of the links that serve the financial industry – including power, telecommunications – can have an impact on all players in the industry.However, ICICI Bank is confident of its special business continuity plan, which details back-up actions in case there is a problem. The bank, like others, has identified and trained staff who will stay on guard on the night of December 31.
Nationalised banks too have asked their staff to work on The Night. However, when asked, a bank officer admitted he had no idea what he would do if there was a problem. “We are being paid an extra allowance to go to work, but we would have no clue what we are supposed to do,” he said.
India’s Y2K preparedness has received a back-handed compliment from countries that are better-prepared.While acknowledging that India has recognised and done its bit to combat the problem, the US Government Y2K website says: “Huge parts of the economy…remain largely un-automated and virtually Y2K invulnerable….However, breakdowns of all kinds are a fact of life in India, and Indians have developed elaborate backup capacities and alternative strategies to cope with almost any inconvenience that comes along.”
In other words, we are so backward that we are almost invulnerable.Being invulnerable is one thing, but being overconfident is another. State Bank of India and Canara Bank, for instance, claim that they are 100 per cent ready for Y2K but have no advice for their customers on what they should be doing to prepare themselves.
ICICI Bank on the other hand has tips for the depositor, while ANZ Bank has designed an elaborate booklet, available on the Web, that specifically addresses customer concerns.
The transition period during which the Y2K bug is expected to hit transactions range from December22, 1999 to January 10, 2000. That’s because a transaction initiated on December 22 – for instance an outstation cheque clearance – could close only in the New Year. Most banks advice against initiating any kind of overseas payments during this time as they can’t guarantee Y2K compliance in the country of payment.
