Banks told to formulate own policies on cheque clearing

The Reserve Bank of India (RBI) today asked commercial banks to formulate their own policies on local and outstation cheque clearing as it has decided to withdraw its instructions on credit of cheques, the time frame for collection of cheques and interest payment for delayed collection.

RBI said banks should formulate a comprehensive and transparent policy taking into account their technological capabilities, systems and processes adopted for clearing arrangements and other internal arrangements for collection through correspondents.

In most countries banks are obliged to develop their own individual policy/ procedures relating to collection of cheques and also provide due disclosures to customers on the bank's obligations and the customers' rights.

RBI said "efficiencies in collection of proceeds and providing funds to customers in time is best achieved through a spirit of competition among the banks rather than through issue of guidelines," by the central bank.

RBI said banks must take adequate care to ensure that the interests of the small depositors are fully protected. The policy framed by a bank in this regard should be integrated with the deposit policy formulated in line with the Indian Banks Association's model deposit policy.

The policy should clearly lay down the liability of the bank by way of interest payments due to delays for non-compliance with the standards set by itself. Compensation by way of interest payment, where necessary, should be made without any claim from the customer.

Banks have also been asked to review their existing arrangements and capabilities and work out a scheme for reduction in collection period.

Every banks is required to obtain the respective board's approval on the reasonableness of the policy and compliance with the spirit of RBI's guidelines.

The Reserve Bank of India and the banking ombudsman would continue to exercise the prerogative to examine any dispute which may arise between the bank and any of its customer, vis-a-vis their published policies and procedures.

Banks have to ensure that wide publicity is given to their cheque clearing policy by placing it on their web-sites and also displaying it on their notice boards at their branches.

The customers are also required to be clearly apprised of the assurances of the bank on the services on these aspects at the time of establishment of the initial relationship be it as a depositor, borrower or otherwise.