Reserve Bank of India’s approach paper on automated data flow from banks
A fallout of the global financial crisis has been that regulators have found that their policy and decision-making processes need to be more information intensive. Hence, it is imperative for banks to ensure quality of data and its timely submission to the regulator.
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With a view to ensuring accuracy and integrity of data flow from the banking system to the Reserve Bank, a core group comprising experts from banks, the Reserve Bank, IDRBT and the IBA was constituted for preparing an approach paper on automated data flow (a straight-through-process) from the core banking solution (CBS) or other IT systems of commercial banks to the Reserve Bank. The full approach paper can be found here »
Technology requirements for banks in India
To start with, the paper discusses the methodology to be adopted by banks to classify themselves into a cluster, based on its technology and process dimensions. According to the paper, banks would be required, in the first phase, to ensure a seamless flow of data from their transaction server to their management information system (MIS) server and automatically generate all returns from the MIS server, without any manual intervention. In the second phase, the Reserve Bank would introduce a system for the flow of data from the MIS server of banks in a straight through process. The timeline of the entire project will be determined in consultation with the banks. Banks have being advised to conduct a self-assessment and furnish the estimated timelines for completing the first phase of the project.
The paper lists the guiding principles that define the basis on which the entire approach has been framed. The guiding principles ensure that the approach to achieve the ‘common end state’ (the state of complete automation for submission of the returns by the banks to RBI without any manual intervention) is independent of the current technologies being used by the banks and can be used by all banks irrespective of their current level of automation. It seeks to leverage on the huge investment made by banks in technology infrastructure. Hence, though each bank may be at a different level of automation, the end state would be common across all the banks. To achieve this, the banks may require a transformation across dimensions of Process and Technology.
Initially, the bank’s preparedness and maturity to adopt a fully automated process will be assessed based on the existing end-to-end process adopted by the banks to submit data to Reserve Bank. Based on a combination of the level of Process and Technology maturity, each bank would be placed in a cluster. The timeframe for automation for each group of returns will depend on the cluster in which the bank is placed. This in turn will determine the timelines for the banks to achieve the common end state for all returns.
Suggested data architecture
The paper goes on to suggest the data architecture that may be applied, which refers to the design of the structure under which the data from the individual source systems in a bank would flow into a centralised data repository. This repository would be used for the purpose of preparation of returns. The key process elements include data acquisition, data integration and storage, data conversion and finally data submission.
In order to strengthen the return submission process in an automated manner, the paper suggests that banks may consider having a Returns Governance Group (RGG) made up of representatives from areas related to compliance, business and technology, and each having clear-cut roles and responsibilities in the process.
By adopting such an automated process for submission of returns, the banks are expected be able to submit accurate and timely data to the regulator without any manual intervention. This process would also enable the banks to improve upon their own MIS and Decision Support Systems (DSS). The automation of data flow is also expected to benefit the banks in terms of improved timelines, enhanced data quality, improved efficiency of processes, reduced costs and the use of the CDR for MIS purposes.
