RBI Notification - Vostro Accounts of Non-Resident Exchange Houses

RBI's notification of 6th Feb 2008 lays down the instructions for the AD Category 1 banks of India for opening and maintaining the Vostro Accounts of Non-Resident Exchange houses in India. The complete notification is in the link below.

http://www.rbi.org.in/scripts/BS_CircularIndexDisplay.aspx?Id=4046

Are the core banking applications that are implemented in the banks capable of handling all or most of the requirements specified in the notification? Can the application handle most of the requirements out of the box? What facilities would the banks want?

Please post your comments on what you feel. If you are working for a bank (either as an internal staff or as a support staff from vendors) please indicate if you are happy with the capability of your core-banking or payments application and what can be done to meet the expectation. Even if otherwise and you have expertise in this area please feel free to provide your comments.

Some of the salient features are:
1. Guidelines for Opening the Vostro Accounts: This includes RBI approval to be sought/Information to be provided to the RBI by the EH/Bank and verification of the antecedents of the EH by the bank, maintenance of authorized signatories and the nature of relationship. Verification of these details at every transaction.

2. Nature or Arrangements: RBI restricts the number of vostro arrangements to 20 and the number of drawee branches to 300 (RBI reserves the right to be lenient). Only those pre-arranged transactions are permitted on the accounts and specific debits are allowed on the Vostros. The list is as below:
a) Credit to Non-resident (External) Rupee accounts maintained by Non-resident Indians in Indian Rupees.
b) Payments to families of Non-resident Indians.
c) Payments in favor of Insurance companies, Mutual Funds and the Post Master for premia / investments.
d) Payments in favor of bankers for investments in shares, debentures Payment to Coop. Housing Societies, Govt. Housing Schemes or
e) Estate Developers for acquisition of residential flats in India in individual names subject to compliance of regulations thereof by the Non-resident Indians.
f) Payments of tuition/ boarding, examination fee etc. to schools, colleges and other educational institutions.
g) Payments to medical institutions and hospitals for medical treatment of NRIs / their dependents and nationals of Gulf Countries in India.
h) Payments to hotels by nationals of Gulf countries / NRIs for their stay.
i) Payments to travel agents for booking of passages of NRIs and their families residing in India towards their travel in India by domestic airlines / rail, etc.
j) Trade transactions up to Rs. 2 lakhs per transaction.
k) No Cash transactions permitted.

3. Workflow for Credits and Debits and Collateral Arrangements: There can be no over-drafts on the Vostro accounts. However provisions are available to use DDA and other designated accounts (within the Drawee bank or in a reputed international bank for funding the Vostro accounts. Details of collaterals for mitigating operational and credit risks have been specified.

4. Reporting and Statements: The notification lists the reports and statements that need to be generated by the banks. This includes statements on the changes in the arrangements, statements of transactions, change in risk assessment etc.

My Product is the worldleader - but does it Work?

I have always heard from many people that our product works when implemented. But when I ask to demonstrate one feature or another I get this common restraint saying - this patch has to be applied, this is a development area. There is an feeling that a product has to be implemented -for months perhaps - for it to work.Many a times I have not been able to do an end to end check of a functionality often at times when the check is critical for a solution.

The result of such an exercise is obviously speculation. The product may work today and may not tomorrow. Something like tracking our SENSEX. There may be a method but who knows what it is.

This leads to a question, does the product really work or is it that it is implemented to get it working. In a product business the onus I have been told is on non-linear grown, if every implementation involves development of a product where does non-linear growth come. Instead it is double dose of expenses one in the name of product development and another as implementation - not considering the others.

Implementation is to set up those parameters that are specific and often exclusive to a bank or a few of them that cannot be in the out of the box product. Perhaps some customization that we have not been able to bring to the products or that we cant for technical framework or due to product economics.

What is the solution for it? A possible direction is to ensure that what has been promised is available as it is in hand-over environment to internal customers. If there is a belief that the problem is a "set up" issue then the solution is to build standard set-ups that can be demonstrated. An interesting approach already implemented at many places is to have a "model implementation" with standard "set ups or end products" that can be sold as a standard industry practice. We have modelled for the market and we need to validate that what we developed is required for the market.

But where does the effort start at bringing organization into the product business. Does it have to be the product management group that has to drive it. How does one build in the technical, functional and consulting capabilities into it. Particularly when the product is existing and involves re-working processes from day one when the product was initially conceptualized. Or does one do it only for new modules and changes. How does one link the new modules that require old processes.

These are some of the issues that one needs to consider when one builds a new product. With this should be the ability to create an infrastructure that sustains changes in the organization, people, trends and technology. But for a mature product that wants to streamline and become more profitable, the answer lies in tough decisions and meticulous planning at creating change.
Till that time budget n-times of rework at each of the departments through which your product flows - design, engineering, implementation, support and else where....and speak to the world about non-linear growth ....and hide this blog spot.