SBI, PNB to promote central retail clearing entity

State Bank of India (SBI) and Punjab National Bank (PNB) are the likely promoters for setting up an umbrella body to manage retail clearing operations of banks.

The objective is to centralise clearing operations of all banks under one body which will monitor and issue guidelines for efficient clearing of retail transactions, said a banking source.

At present, there are 1,048 clearing houses across the country for retail operations. Of which SBI manages the major bulk, followed by PNB.

Since the shares of private banks have also considerably gone up in retail banking operations, HDFC Bank and ICICI Bank may also be roped in as promoters of the proposed clearing body.

Banking sources said the Indian Banks' Association (IBA) is discussing the issue with the banks, but has yet to finalise the modalities. Issues relating to capital requirement and other rules and regulations are being worked out by the IBA in consultation with the RBI.

The clearing body will be set up as a registered company under the Company's Act. "Once the National Payment Council Act gets passed, the RBI will have the regulatory authority over the entity. Till such a time, the body will be run by the promoters under the guidance of the banking regulator", the source said.

Even as the settlement of banking operations will be managed centrally by the RBI, the umbrella clearing body will oversee both paper-based and non-based MICR retail transactions.

This includes the payments done under electronic fund transfer, electronic clearing service among others. Corporate transactions will continue to be managed centrally on the real-time gross settlement platform.

Currently, each bank manages its own clearing operations either through its own clearing house or tying up with another bank which has a clearing operation.

This calls for each bank having to maintain adequate funds, which more often than not lie idle. Under the new proposed system of one umbrella organisation managing the clearing activities, each bank will not have to maintain funds on a daily basis.