Saturday, November 13, 2010

Speed Clearing - Warning

Speed Clearing - Warning
All customers are requested to keep the necessary funds available in their  account as soon as a cheque are  issued from their  side.

As all Bank Customers are familiar with Cheque Clearing, I will not write in detail about Cheque Clearing.

Before the Banks moved to Core-Banking Solution (CBS), the 1 major problem faced by Bank customers were the delay in Cheque Collection coupled with the high cheque collection costs.

To reduce the cheque clearing cycle, Reserve Bank of India, had introduced the National Clearing (Inter-City Clearing)

National Clearing is an arrangement under which the Clearing Houses managed by RBI provide inter-city cheque collection service to member banks of those clearing Houses.

With the entry of new private sector banks, the Indian Banking system saw the emergence of CBS.

To leverage the benefits of CBS, Reserve Bank of India, in 2008, introduced the Speed Clearing
RBI’s FAQ’s on Speed Clearing are @

"Speed Clearing" leverages the technology of core or centralized banking solution (CBS) of banks which enables them to access details of all account holders from any branch.

How is Speed Clearing an improvement over National Clearing ?
In case of National clearing the cheque is realized in around a week's time. Under the Speed clearing, it would be realized on T+1 or 2 basis viz. within 48 hour s.

National Clearing is restricted to cheques drawn on the specified locations. Speed Clearing has no geographical limitation. Cheques drawn on any location may be cleared as long as the branch is in CBS.

National Clearing necessitates movement of the cheque to the Drawee centre. Speed Clearing facilitates the clearing of such cheques locally without the need to move the cheques to the Drawee centre.
How does the Speed Clearing work ?
Banks have networked their branches by implementing Core Banking Solutions (CBS). In CBS environment, cheques can be paid at any location obviating the need for their physical movement to the Drawee branch. The concept Speed Clearing combines the advantages of MICR clearing with CBS.

Cheques drawn on outstation CBS branches of a Drawee bank can be processed in the Local Clearing under the Speed Clearing arrangement if the Drawee bank has a branch presence at the local centre.
As more banks moved to CBS, the number of Bank Branches under Speed Clearing saw a tremendous growth.

At present, Speed Clearing is offered at 66 locations and the number of Bank Branches are 41,000 +.

Initially, in 2008, there was a general skepticism as to whether Speed Clearing would succeed or not.

Yes, there were complaints from both the Bankers as well as the customers. But, with passage of time, all the participants’ i.e Bank’s, Bank Branches’, Customer’s understood the benefits of the Speed Clearing and each did their bit to promote Speed Clearing.

The main reasons for the initial complaints were
01)                      Branches were on CBS, but the Signatures were NOT scanned in the Accounts. Hence, cheques had to be returned with the reason ‘No Signature’.

02)                      Cheque leaves were not linked to the respective accounts in the CBS. Hence, cheques had to be returned with the reason NOT ISSUED/NOT IN RANGE etc.

03)                      Upcountry customers usually expected cheques to be received for payment at their base branches after 10 days of the Cheque Date. So, funds were accordingly arranged. In Speed Clearing, the cheques  hit their accounts within 1-2 days of the Cheque Date.  And, as the customer’s were not expecting this, the cheques got returned with the reason INSUFFICIENT FUNDS.

04)                      Non-MICR cheques were not part of Speed Clearing, even though the Branches were under CBS. However, as still many Non-MICR cheques were issued by the Banks, these cheques got returned. Slowly, Banks started to request RBI to allot MICR Codes for their branches, which in turn enabled Banks to issue MICR Cheques.
Once, they become familiar with Speed Clearing, they planned their funds cycle accordingly.

Speed Clearing Charges: -
Upto and inclusive of Rs.1,00,000/- : Free

Rs.1,00,001/- and above : Rs.150/- per instrument plus service tax as applicable

Instruments processed through Speed Clearing :
a.     Instruments with Transaction codes 10,11,and 13.
b.     Only MICR instruments to be processed.

Instruments not a part of Speed Clearing :
a.     Demand Drafts
b.     Non-MICR Cheques
c.      Cheques drawn on a bank or bank branch which is not part of SCS

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