Saturday, 24 September 2016

Computerisation of Clearing and Settlement Operations in India

Computerisation of clearing operations was the first major step towards modernisation of the payments system in India. The introduction of technology for clearing operations began with the setting up of 'Claim Based Settlement System' using Microprocessor based computer systems at Mumbai, Chennai and Delhi, in the early eighties. These systems were used for generating settlement reports on the basis of input statements containing the aggregate value of (cheques presented) claims of one bank over the other banks in the clearing house.  Clearing balancing and settlement, which used to take a long time due to differences and errors in manual balancing, were reduced, apart from providing accuracy in the final settlement.
The next important milestone was fully automating the clearing operations. The rapid growth of cheque volumes in the eighties made the task of manual sorting and listing a very difficult task. Banks were unable to cope with the huge volume of cheques which had to be physically handled prior to their presentation in the clearing house. Though the clearing settlement became easy because of computerisation, the heavy volumes of paper that had to be processed introduced delays in presentation resulting in delayed credit to the customers. The growth in the volumes could therefore, be managed only by mechanisation of the entire clearing process.
The solution was the introduction of Magnetic Ink Character Recognition (MICR) based mechanised cheque processing technology. The existing cheques had to be redesigned incorporating a MICR codeline which could be read by document processing machines called reader-sorters. The RBI introduced two types of reader-sorters - the Medium Speed Reader Sorters, capable of processing 300 instruments per minute for Inter-city instruments and the High Speed Reader Sorter Systems (HSRS) with speeds of 2400 documents per minute, for the clearing of local instruments. Driven by mainframe computers the HSRS systems were the state-of-the-art systems available at that time. These were installed in Mumbai (1986) followed by Chennai, New Delhi, (1987) and Kolkata(1989). By the middle of 1989 MICR cheque clearing operations in the four metropolitan cities had become fully operational and stabilised.
MICR Codeline contains basic cheque information in designated fields for data capture and mechanical sorting of the cheques. The codeline is both pre-printed and later encoded using special MICR ink, using standardised E13B Font.
(Source: Reserve Bank of India)

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