The Indian banking industry has been constantly transforming with different channels of services evolving, new products and payment methods being launched and greater focus towards financial inclusion with consolidation among banks. There is a need for banks to manage their assets and liabilities better and align their business strategy with their corporate vision and objectives.
The Reserve Bank of India (RBI), as a policy maker, constantly seeks to bring reforms to ensure that banks conduct businesses fairly, transparently and responsibly and are accountable to customers and stakeholders. Within banks too, it is necessary to have a robust regulatory and compliance strategy and process to adhere to policies.
In late 2010, the RBI introduced a path breaking initiative with the Automated Data Flow (ADF) compliance which mandated an automated reporting system for banks. ADF requires a straight-through reporting process (STP) without any manual handling and needs all business operations data to be made transparent in an automated manner to RBI. The ADF guidelines expect banks to ensure that the process of handling information is flexible and mature.
With the diversity of the subject areas, the involvement required from IT teams and the aggressive deadline given by RBI, banks looked at buying products from vendors, while some banks opted for in house development along with a few engaged services vendors. While all banks have not yet been able to achieve complete ADF compliance, a significant amount of time and money has been invested to achieve 100% data flow automation.
The RBI considered ADF as the facilitator for accurate real-time insights into the Indian financial services sector. This was also a strategic move on the part of the RBI to bring in a technology-driven data collection approach, which will enable better BI and analytics developed based on the same data.
The RBI approach paper on ADF implementation states the RBI seeks to ultimately achieve a state of complete automation for submission of reports by the banks from their core banking system solutions without any manual interventions. To reach this goal, RBI has segregated the return submission process into four logical processes.
Finally, ADF implementation is designed to make the process of reporting easier and quicker. With minimal manual intervention, the reports would be in line with banks' financial statements ensuring consistency and comparability.
With a lot of banks investing considerably in ADF and also employing niche ADF experts to add value and accelerate efficiency, the Indian banking sector is almost ADF compliant and poised to scale new heights.