What is Speed Clearing?
Speed Clearing refers to collection of outstation cheques (a cheque drawn on non-local bank branch) through the local clearing. It facilitates collection of cheques drawn on outstation core-banking-enabled branches of banks, if they have a net-worked branch locally.
Why Speed Clearing?
The collection of outstation cheques, earlier required movement of cheques from the Presentation centre (city where the cheque is presented) to Drawee centre (city where the cheque is payable) which increases the realisation time for cheques. Speed Clearing aims to reduce the time taken for realisation of outstation cheques.
Even though Speed clearing hastens the process of cheque collection as compared to outstation cheque collection, it pre-supposes the presence of the drawee bank branch in the clearing house location
Process followed by banks for collection of outstation cheques before the introduction of Speed Clearing
A person who had an outstation cheque with him/her use to deposit it with his/her bank branch. This bank branch is called the Presenting branch. The cheque, was sent for collection to the city where it was payable / drawn called Destination centre or Drawee centre. The branch providing the collection service is called the Collecting branch. On receipt of the cheque, the Collecting branch use to present the physical instrument in local clearing at the drawee bank branch location through its branch at the drawee bank branch location. Once the cheque was paid, the Collecting branch use to remit the proceeds to the Presenting branch. On receipt of realisation advice of the cheque from the Collecting branch, the customer’s account was credited. This, in short, is the process of Collection before the introduction of Speed Clearing.
When a cheque was accepted on a collection basis by a bank, the customer’s account was credited only after realisation of proceeds. In the absence of a clearing arrangement at the Destination centre, the Presenting branch was sending the cheque directly to the Destination branch for payment. On receiving the proceeds from Destination branch, Presenting branch follow the practice of crediting the customer’s account.
How long does it take for getting credit of an outstation cheque sent on Collection basis?
Generally, it takes around a week to three weeks’ time depending on the drawee centre and collection arrangements to get outstation cheques realised on a Collection basis.
How does the Local Cheque Clearing work?
In Local Cheque Clearing in major centres, cheques are processed by using Cheque Truncation Systems(CTS) through movement of images. Grid based CTS are in place in New Delhi, Chennai and Mumbai. In addition, Express Cheque Clearing Systems (ECCS) application package is used in small clearing houses.
Local Clearing handles only those cheques that are drawn on branches within the jurisdiction of the local Clearing House. Generally, the jurisdiction is determined taking into account the logistics available to physically move to and from the Clearing House.
It may however be noted, under grid-based CTS clearing, all cheques drawn on bank branches falling within in the grid jurisdiction are treated and cleared as local cheques. The grid clearing allows banks to present/ receive cheques to/ from multiple cities to a single clearing house through their service branches in the grid location.
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. 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.
When will the beneficiary get funds under Speed Clearing?
As on date, the local cheques are processed on T+1 working day basis and customers get the benefit of withdrawal of funds on a T+1 or 2 basis. ‘T’ denotes transaction day viz. date of presentation of cheque at the Clearing House. So, the outstation cheques under Speed Clearing will also be paid on T+1 or 2 basis like any other local cheque.
What are the charges for cheques cleared through Speed Clearing?
With effect from April 1, 2011, no charges will be payable for cheques of value up to and including Rs.1 lakh by Savings a/c customers. Banks would be free to fix charges for collection of other types of accounts for all values and also from Savings a/c customers for cheque of value above Rs.1 lakh. Charges fixed should be reasonable, computed on a cost-plus-basis and not as an arbitrary percentage of the value of the instrument and to be levied in an upfront manner with due dissemination to the customers of such charges.
How is Speed Clearing an improvement over collection basis?
Outstation cheque collection through collection basis takes around one to three weeks’ time depending on the drawee centre. Under Speed Clearing, it would be realised on T+1 or 2 basis, say, within 48 hours. Further Savings Bank customers need not incur any service charge for collection of outstation cheques (value up to Rs.1 lakh) in Speed Clearing which they may have to incur if such cheque is collected under collection basis.
How will a customer know whether a cheque can be cleared in Speed Clearing?
For facilitating customers to know CBS status of a branch, some of the banks stamp / print ‘CBS’ on the cheque leaves. Account numbers (if length of account number is more than 10 digits) printed on the cheque leaves may give a broad indication regarding CBS status of the branch.
What type of cheques can be presented in Speed Clearing?
Instruments of all transaction codes (except Government cheques) and drawn on CBS-enabled bank branches are eligible for being presented in Speed Clearing.