Saturday, 24 September 2016

Types of clearing and settlement operations

The clearing operations in India are classified in five major types as described below:

  • Inter-city clearing: The four metropolitan centres viz., Mumbai, New Delhi, Calcutta and Chennai are covered by two way inter-city clearing. The other offices of the RBI are connected with these four centres under one way inter-city clearing. Under this system, inter-city cheques drawn on any of the metropolitan centres are processed at the MICR clearing and are sent to the drawee centre by postal courier where they are integrated with the local clearing of that centre. This National Clearing has sharply reduced the time taken for realisation of these cheques.

  • Regional Grid Clearing operations: As a logical step towards extension of Inter-city clearing at all the major cities, a regional grid clearing was introduced in a small way. Important commercial centres/district headquarters in a region were connected for one way clearing with the nearest MICR centre. Thus, cities such as Coimbatore, Madurai, Pondicherry were linked to Chennai, Pune and Vadodara to Mumbai, Asansol and Jamshedpur to Calcutta etc. The benefits of reduced time for inter-city clearing was thus extended to such cities too.

  • Clearing houses managed by the RBI: The settlement operations in all non-MICR based clearing centres managed by the RBI viz., the clearing houses at Ahmedabad, Kanpur, Bangalore, Hyderabad, Nagpur, Patna, Jaipur, Thiruvananthapuram, Guwahati and Bhubaneshwar were also computerised by the introduction of a magnetic media based input settlement software package, developed in-house. The clearing data from the banks aggregated as receivables, are submitted in floppies to the clearing house and settlement is carried out.

  • High Value clearing: High value clearing is a value added service. In this clearing select branches located in a central business/commercial area and in the vicinity of the Clearing House/Service Branches of banks present instruments with a face value of Rs.100,000/- and above deposited by their customers within a specified cut-off time, to the clearing house. The instruments are dropped into the respective receptacles of the drawee banks and settlement is carried out through floppy based input statement. The return clearing is held before close of banking hours on the same day. In 1994, the total value of instruments presented in this clearing at the 4 metros was Rs.522,871 crores. By 1997, this had gone up to Rs.949,502 crores. (1 crore is equivalent to 10 million). High value clearing enables a customer who deposits a cheque on day 1 to withdraw the amount on day 2 itself, provided, there is no return. High value clearing is therefore, faster compared to regular MICR clearing.

  •  Inter-bank Clearing: Inter-bank payments are usually settled among banks by issuing cheques drawn on their accounts with Reserve Bank of India. This practice resulted in a large number of cheques being presented to Deposit Accounts Department (DAD) of the Reserve Bank, leading to heavy work pressures throughout the day. It was therefore, decided to start a separate Inter-bank clearing. In the Inter-bank clearing banks no longer use the RBI cheques to settle their claims against each other. Instead, they use their own Bankers Cheques. The settlement is carried out through Floppy Based input statements, submitted to the Clearing House. The pay orders are however, dropped in the designated receptacles, from where they are collected by banks' representatives. Since there is no return for these instruments, the credit / debit is instantaneous. Inter-bank clearing is used by banks mainly for four types of transactions: call money transactions, Rupee payment of foreign currency transactions, Bank to Bank transfers for funding upcountry requirements and Inward remittances. Inter-bank clearing was introduced in Chennai in April 1989, followed by Mumbai, Kolkata and New Delhi.

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