Banks may charge for high-value cheques

Banks are considering levying a charge of Rs 50 on high-value cheques, while making local payments through real time gross settlement (RTGS) free.

This is aimed at moving customers from paper-based products to electronic payment.

Currently, banks charge customers for making payments through real time gross settlement but the cost of processing cheques is borne by banks.

Cheques of Rs 1 lakh and above are considered to be high value. The real time gross settlement facility is available to customers for payments of Rs 1 lakh and more. Banks charge around Rs 20 for local payments using RTGS.

"The charge of Rs 50 on cheques will be more than RTGS charges, which will encourage customers to shift to RTGS. RTGS offers the twin advantages of fast settlement and a reduction of fraud," said banking expert US Bhargava.

The central bank had asked banks, under the aegis of the Indian Banks' Association, to consider a mix of incentives for electronic payments and disincentives for paper-based payments.

Last week, the RBI had rejected its own study group's suggestion to impose a charge on all cheque-based payments.

The RBI panel had recommended that banks levy a charge on clearing cheques to accelerate the switch to electronic transfer of funds.

The number of transactions put through RTGS has grown nearly four-fold from 69,066 in April 2005 to 3,38,110 in October 2006, but there has been no visible reduction in high value clearing transactions.

Customers would be given two months advance notice before implementing this arrangement and the rationale explained to trade bodies. An evaluation of the impact of the levy will be conducted after six months.