Indian banks dealing in foreign exchange and not willing to upgrade their existing technology would not be able to continue with the transactions after September 08. SWIFT (Society for World-wide Interbank Financial Communication), a financial messaging network, is widely used by banks for forex transactions.
It is changing its existing technology called Bilateral Key Exchange (BKE) and is switching to Relationship Management Application (RMA). Banks dealing in forex will have to invest in the new technology. Those banks, which are not willing to upgrade their technology, would be barred from operating in forex.
BKE is the protocol to be established between banks that wish to exchange financial transaction messages with each other. RMA would not only help the banks to deal with the increase in traffic, it will also help in reducing the costs, thus giving a huge boost to the revenues.
The new system (RMA) would help in saving a lot and is better than the old system (BKE). Though I would not be able to quantify the exact monetary gain as of now, but I can confirm that it would be substantial, said KRS Mani, senior manager treasury, Union Bank of India (UBI), Mumbai.
UBI is one of the first banks to go for RMA upgradation. Other Indian banks, which are a part of forex, are also in the process of upgrading the technology. Industry experts point out that the total cost of upgradation world-wide could run in to millions but the banks will earn billions through forex transaction.
SWIFT is a co-operative society under Belgian law and it is owned by its member financial institutions. It was founded in Brussels in 1973 and was supported by 239 banks in 15 countries. It established common standards for financial transactions and shared a data processing system and world-wide communications network.
However, after September 2008, SWIFT will reject BKE messages and customers will not be able to establish or maintain relationships with other bankers for forex. In Europe, SWIFT penalises the banks which do not meet the upgradation timeline.
However, this will not be applicable in India. World-wide, SWIFT has 15 vendors who can upgrade the technology two of them being in India.