Tuesday, August 15, 2017

National Automated Clearing House – Banks are requested to adhere to the laid down rules

          NPCI through circular dt July 19, 2017 has strictly advised all member banks participating in NACH Mandate Management System to adhere to laid down procedures while processing mandates.

          Mandate Management System is in operation from 2013 and over the years, 2.71 crores mandates have been added to the MMS repository.

          It was brought to the notice of NPCI that some of the member banks had started formulating their own rules for acceptance of mandates. Such non-standardised processes by banks have led to confusion in the participants of NACH eco-system.  

          Hence, NPCI to restore order in the NACH eco-system has advised Banks to strictly follow the laid-down procedures while processing the mandates.

          However NPCI is open to suggestions and has advised member banks to put forth any process improvement points to the Steering committee. The process improvements points will be deliberated at the Steering committee and further action will be planned.

          Yes, non-members too can put their points to the Steering Committee. This is a welcome step by NPCI


Mandate Management System (MMS) is an essential part of National Automated Clearing House (NACH) service. The Mandates are necessary from the regulatory National Automated Clearing House perspective in order to process NACH transactions.
As a step towards streamlining the process and making it more customer and participant -friendly, it is proposed to implement the MMS, where mandate information is captured on a standard cheque like mandate form.


Sunday, July 23, 2017

Government of India Digital Transactions Target – 2,500 crores / 25 Billion

          Government of India under the leadership of Shri Narendra Modi has set a target of 2,500 crore digital transactions in the financial year 2017-2018.

          The number of 2,500 crore digital transactions or 25 billion digital transactions has been announced by Shri Arun Jaitely, Union Minister for Finance, Government of India, in Parliament on February 1, 2017 during the presentation of the Union Budget for 2017-18.

An announcement has been made to set up a Mission to reach 25 billion digital transactions for 2017-18 through Unified Payment Interface (UPI), Unstructured Supplementary Service Data (USSD), Aadhar Pay, Immediate Payment Service (IMPS) and debit cards.

Please note transactions through Cheques will not qualify under the 25 billion numbers.

The action from the Central Government side has picked up for ensuring that the target of 25 billion digital transactions is met by 31st March, 2018.

The government has split the number across 35 government ministries and 29 states and seven Union Territories.

In the next couple of months a real-time tracking portal will be rolled out. The primary objective of the portal is to remind the various stake-holders the road ahead.

The ministry of road transport and highways and the department of telecommunications (DoT) will be chasing the highest targets for electronic payments in the government's plan to turn India into a less-cash economy.

Ministries have been chosen depending on their ability to carry out digital transactions through their physical footprint. “For the petroleum ministry, the point of interface will be the petrol pump network; for human resource development it is the educational institutes, and for railways, it will be the stations or the booking counters," said the official.

Image courtesy - Economic Times

While the ministry of road transport and highways and the department of telecommunications have been given targets upwards of 5 billion, they are followed by the ministries of railways and petroleum and natural gas, which must aim for 2.82 billion and 2.29 billion transactions, respectively.

Now the targets have been distributed, the respective ministries and states will unveil detailed road-maps.

Among states, Maharashtra and Uttar Pradesh have the highest targets (above 3 billion) followed by Tamil Nadu, West Bengal and Gujarat with numbers in the 1.5-2 billion range.

Friday, June 23, 2017

RBI Missive @ Recording of Details of Transactions in Passbook/ Statement of Account

           Reserve Bank of India has issued fresh guidelines regarding ‘Recording of Details of Transactions in Passbook/ Statement of Account’,

          Q: What is Bank Passbook/Statement of Account?
Ans: Statement is a record of all money going into and coming out of your account over a period of time.  

Bank statements can be accessed through Net Banking, Mobile Banking APP, online or on paper.

Your statement will show your balance at a given time and the money you have available to take out of the account.

Reserve Bank of India’s Circular No RBI/2016-17/326 DBR.No.Leg.BC.76/09.07.005/2016-17, dt June 22, 2017, highlights the basic details which have to reflect in the Bank Account Passbook/Statement of Account .

Illustrative narrations to be recorded in the Statement of Account/ Passbook

Two categories of transactions reflect in the Bank Account Passbook/Statement of Account - Debit Category and Credit Category

Debit means withdrawal and Credit means deposit

I.       Debit entries

a) Payment to third parties      

(i) Name of the payee
(ii) Mode – Transfer, clearing, inter-branch, RTGS/ NEFT, cash, cheque (number)
(iii) Name of the transferee bank, if the payment is made through clearing/ inter-branch transaction/ RTGS/ NEFT

b) Payment to ‘self’         

(i) Indicate “Self” as payee
(ii) Name of the ATM/ branch if the payment is made by ATM/ another branch

c) Issuance of drafts/ pay orders/ any other payment instrument      

(i) Name of the payee (in brief/ acronym)
(ii) Name of the drawee bank/ branch/ service branch

d) Bank charges    

(i) Nature of the charges – fee/ commission/ fine/ penalty etc.
(ii) Reasons for the charges, in brief – e.g. return of cheque (number), commission/ fee on draft issued/ remittance (draft number), cheque collection charge (number), issuance of cheque book, SMS alerts, ATM fees, additional cash withdrawals, etc.

e) Reversal of wrong credits    

(i) Date of the original credit entry reversed
(ii) Reasons for reversal, in brief

f) Recovery of instalments of a loan/ interest on loan      

(i) Loan account number
(ii) Name of the Loan account holder

g) Creation of fixed deposit/ recurring deposit     

(i) Fixed Deposit/ Recurring Deposit Account/ Receipt number
(ii) Name of the Fixed Deposit/ Recurring Deposit Account holder

h) Transactions at POS   

(i) Transaction date, time and identification number
(ii) Location of the POS

i) Any other (i) Provide adequate details on the same lines as mentioned above.

Note: In case of single debit in account with multiple credits, the payee name/ account number/ branch/ bank shall not be recorded. However, the fact of “multiple payees” will be indicated.

II.     Credit Entries

a) Cash deposit     

(i) Indicate that it is a “cash deposit”
(ii) Name of the depositor – self/ third party

b) Receipt from third parties  

(i) Name of the remitter/ transferor
(ii) Mode – Transfer, inter-branch, RTGS/ NEFT, cash, etc.
(iii) Name of the transferor bank, if the payment is received through inter-branch transaction, RTGS/ NEFT

c) Proceeds of clearing/ collection/ draft etc. paid

(i) Name of the draft issuing bank
(ii) Date and number of the cheque/ draft

d) Reversal of wrong debits (including charges)     

(i) Date of the original debit entry reversed
(ii) Reasons for reversal, in brief

e) Interest on deposits  

(i) Mention if it is interest paid on the Savings Account/ Fixed Deposit
(ii) Mention the respective Fixed Deposit Account/ Receipt Number if it is interest paid on Fixed Deposit(s)

f) Maturity proceeds of fixed deposit/ recurring deposit         

(i) Name of the Fixed Deposit/ Recurring Deposit holder
(ii) Fixed Deposit/ Recurring Deposit account/ receipt number
(iii) Date of maturity

g) Loan proceeds    (i) Loan account number

h) Any other          (i) Provide adequate details

          The operative date of the circular is not mentioned, this means that the banks have to implement these changes immediately

Extract from:  BCSBI Code of Banks Commitment to Customers


Statements: To help you manage your account and check entries in it, we will provide you with a monthly statement of account unless you have opted for a pass book.


          Reserve Bank of India vide Paragraphs 6 and 7 of Circular DBOD.No.Leg.BC.74/09.07.005/2003-04 dated April 10, 2004 had advised  banks to avoid inscrutable entries in passbooks/ statements of account and ensure that brief, intelligible particulars are invariably entered in passbooks/ statements of account with a view to avoiding inconvenience to depositors.

          However, account-holders have approached Reserve Bank of India or highlighted in various forums the difficulties in interpreting details in Bank Account Passbook/Statement of Account.
          Statement of Accounts not only assists account holders to keep a track of thief financial transactions but also assist third-parties to arrive at the financial position of the account holders.
          Hence it is of utmost importance that the Transactions Details in Bank Account Passbook/Statement of Account are legible and make sense to the reader. The clearer are the transaction details, the less account holders will approach Bank staff/Call Centre for clarity.

 Additional specific guidelines::

As per NPCI NACH Circular dt October 05, 2016, Sponsor Banks have to provide ‘User Name’, and ‘User Ref No’, in the transaction file. This will enable Destination Banks to consume these details and ensure that the same reflect in the account holders Passbook/Statement of Account.

As per RBI NEFT procedural guidelines, beneficiary has to be advised of the Receipt of Funds in his/her bank account. The Account Statement / Pass Book entry or any online messaging system shall indicate briefly the source of funds as well.

For this purpose, the mandatory field 6091 which contains the remitter's name shall be picked up for the source of credit and information contained shall be printed in the Account Statement / Pass Book. Banks originating transactions shall ensure proper and meaningful details are provided in this field.

Description of field 6091 is:

M  6091  Sending customer a/c name    50x    Sender's account name

Sender to be advised in Case of NEFT Returns - If the beneficiary specified in the sender's payment instruction fails to get payment through the NEFT system for some valid reasons, the sender shall be informed immediately after the sending bank gets the returned NEFT.

The originating bank shall provide the description “NEFT-Return” in the pass book / account statement of the originator whose NEFT transaction is returned.

Additional Reading:

01) ‘Make bank statements less cryptic’


03)           History of Passbook

Saturday, June 17, 2017

Is it time to dump Cheque Truncation System Return Code 55 - Account blocked (situation covered in 21-25)?

       Of the myriad CTS Return Codes, two return reason codes cause the most distress.

 Return Code 55 - Account blocked (situation covered in 21-25)

Return Code 84 - Other reason- connectivity failure

Connectivity Failure – Account holders fail to understand as to where the connectivity failure is. Is it the Presenting/Collecting  Bank fault or the Drawee Bank fault?  

This explanation by Punjab and Sindh Bank underlines the meaning of Cheque Return Reason – Connectivity Failure

Link failure is an operational disruption and such instances are mostly observed in remote locations where the cheque volumes are not significant. In situations of link / network /connectivity issues, branches are advised to proceed as under: -
Branch should explore other alternatives before returning the cheques viz. processing at the service /drawee / nearby branch as feasible.

After exhausting all avenues if it is necessary to return the cheque due to link failure, it may be returned under Reason Code 84 (Other reasons-Connectivity Failure), with no charges to be debited to the payee’s account.

No charges shall be recovered from the payee for return of the cheque in such cases. Such cheques should be re-presented in the next clearing without waiting for a request from the payee.

But the most perplexing Cheque Return Reason is :::-

Return Code 55 - Account blocked (situation covered in 21-25)

Customers scratch their head, when they see this Return Reason in their Account Statement. Customers frantically call up their bank for the exact return reason, and the Presenting/Collecting  Bank is also clueless!!

What are the situations’ covered under Return Code 21-25?

Return Code 21 -- Payment stopped by attachment order

Return Code 22 -- Payment stopped by court order

Return Code 23 -- Withdrawal stopped owing to death of account holder

Return Code 24 -- Withdrawal stopped owing to lunacy of account holder

Return Code 25 -- Withdrawal stopped owing to insolvency of account holder

          It would be great for all the stake holders and also reduce stress levels, if NPCI issues a circular stating that “Return Code 55”, is removed and instead Banks are to mention the Return Codes 21-25, as applicable.

          For a more detailed article on various Cheque Return Reasons, please refer to my earlier article “LIST OF CHEQUE RETURN REASONS – BOTH FOR INSTRUMENT AND IMAGE-BASED CHEQUE CLEARING”

          Well, not much has changed from 2013 to 2017.

          Clear return codes will encourage more businesses to migrate from cash based transactions to cheque based transactions.

          No, the cheque volumes under CTS are not on the decrease. In fact they are on the increase. The decision to demonetise old Rs. 500/1,000 notes, has led to a sharp jump in Cheque transactions.

          Also under the revised Section 44AD of the Income-Tax Act, 1961, in case of certain assessees (an individual, HUF or a partnership firm other than LLP) carrying on any business having a turnover of Rs. 2 crore or less, the profit is deemed to be 8 per cent of the total turnover for taxation.

However if digital mode of payments are used, the eligible assesses income will now be presumed to be 6 per cent of the turnover and not 8 per cent. Cheque transactions are part of the digital mode of payments.
This table reflects the growth of cheque volumes under CTS-South Grid

Illustrative but not exhaustive list of objections where customers are not at fault

(Applicable for instrument and image-based Cheque Clearing as detailed in Annexure D to Uniform Regulations and Rules for Bankers' Clearing Houses)

Code No.       Reason for Return

33       Instrument mutilated; requires bank's guarantee
35       Clearing House stamp/date required
36       Wrongly delivered/ not drawn on us
37       Present in proper zone
38       Instrument contains extraneous matter
39       Image not clear ; present again with paper
40       Present with document
41       Item listed twice
42       Paper not received
60       Crossed to two banks
61       Crossing stamp not cancelled
62       Clearing stamp not cancelled
67       Payee's endorsement irregular/ requires collecting bank's confirmation
70       Advice not received
71       Amount/ Name differs on advice
72       Drawee bank's fund with sponsor bank insufficient(applicable to sub-members)
73       Payee's separate discharge to bank required
74       Not payable till 1st proximo
75       Pay order/cheque requires counter signature
76       Required information not legible/correct
80       Bank's certificate ambiguous/ incomplete/required
81       Draft lost by issuing office; confirmation required from issuing office
82       Bank/ Branch blocked
83       Digital Certificate validation failure
84       Other reasons-connectivity failure
87       ‘Payee's a/c Credited'-Stamp required
92       Bank excluded

Thursday, May 11, 2017

NEFT is almost Real Time now-11 Benefits of NEFT

            Come July 10, 2017 and a new era will commence in India’s ePayment system. Buoyed by the increase of volumes in NEFT, Reserve Bank of India has introduced additional NEFT settlement batches

In NEFT, the funds transfer happen in batches as compared to real-time in RTGS or as the full form suggests Real Time Gross Settlement.

Under NEFT, settlement takes place with all transactions received till the Particular cut-off time in a particular batch.

After the introduction of 11 additional NEFT settlements, the total number will increase to 23 at half hourly settlement batches during the day. Currently there are twelve settlements from 8 am to 7 pm at hourly intervals. 

The overall NEFT timings - between 8.00 am and 7.00 pm - will remain the same as earlier.

The more number of settlement batches means that the fund transfer will happen at a quicker pace. This will improve the efficiency and add to customer convenience, the RBI said. However, the timings that the banks follow may vary depending on the customer timings of the bank branches.

The minimum amount which can be remitted through NEFT is INR 1. The maximum amount is restricted to the amount available in the originators bank account.

Through the additional 11 batches, the transfer is almost instantaneous.

"The half hourly settlements would speed up the funds transfer process and provide faster credit to the destination accounts," the RBI said in a notification.

The RBI has advised banks to carry out the required changes in their processing system to initiate the NEFT transactions for half hourly settlements. They have also been told to accept and credit the inward NEFT transactions on half hourly basis. Customers will also get a confirmation SMS once the transaction is completed.

NEFT online fund transfer to get faster from July 10 as settlement frequency doubles

The Reserve Bank of India has decided to reduce clearance time for online money transfers using the NEFT (National Electronic Funds Transfer) mechanism by increasing the settlement frequency to every half-an-hour, from the existing one hour.

Customers having savings or current account are eligible to avail NEFT/ RTGS service. Individuals who do not have a bank account can also deposit cash at the NEFT-enabled branches. However, such cash remittances will be restricted to a particular amount per transaction.

11 Benefits of NEFT to Corporates   

 Benefit NO 01:: Access to customers of 183 + Banks

Benefit NO 02:: Access to customers spread over the length and width of India via 1,37,000+ Bank Branches

Benefit NO 03:: Special facility to receive Credit Card dues. In case of payments towards Credit Card dues, customers have to key in the 16 Digit Credit Card Number as the Beneficiary's account number, the Beneficiary's account type as 52 and the beneficiary bank's IFSC will be the IFSC of the branch responsible for handing these card bill payments.

The card issuing banks have to designate a branch for accepting such payments and communicate the IFSC of the designated branch to their credit card customers.

Through this facility the card holders can plan the payment date of their credit card dues.  They can schedule future dated payments through their respective online banking tool.

Ban k of India Card Payment through NEFT

Benefit NO 04:: Centralized Customer Facilitation Centers facilitate quick resolution of queries.

Benefit NO 05:: Positive conformation by the Beneficiary Bank.

The main grouse of NEFT users was the non-availability of any conformation once the beneficiary has received the customers. They were multiple complaints from corporate that the beneficiaries did not receive the funds. In majority of the cases it was noticed that the funds were received by the beneficaries, however in the absence of any conformed messages, Banks were finding it difficult to respond to queries.  Hence, Reserve Bank of India introduced the concept of “Acknowledgement / Positive Confirmation by the Beneficiary Bank”. This step was welcomed by the Users and led to increase in the NEFT volumes.

How does the “Positive Conformation”, work?
The originator has to indicate his/her mobile number or email id in the NEFT Application while initiating the transaction. Usually, the customers’ mobile number and email id is picked up from the CBS Module.

·         After successfully crediting the Beneficiary's account, the beneficiary bank will send a Credit Acknowledgement message indicating “credited to customers' account” to the originating bank through NEFT Service Centre.

·         The originating banks after receiving the positive confirmation message from the beneficiary bank, initiates a mobile SMS or generate an e-mail to the originator to convey the fate of the transaction.

Basing on customization for corporate customers, this positive conformation message can be part of the MIS available in the corporate banking website.

Benefit NO 06:: Return Transactions are highlighted with special narration in the customers statement of account.  The originating bank has to provide the description “NEFT-Return” in the pass book / account statement of the originator whose NEFT transaction is returned.

Benefit NO 07:: Standard narration in Beneficiary’s statement of bank account . Another main grouse from the beneficiaries was improper narration in the statement of bank account. To minimize such complaints, Reserve Bank of India has advised all Banks to provide standard narration for NEFT Credits.

After crediting the account of the beneficiary, the beneficiary bank has to advise the beneficiary of the funds received.

The Account Statement / Pass Book entry or any online messaging system shall indicate briefly the source of funds as well.

 For this purpose, the mandatory field 6091 which contains the remitter's name shall be picked up for the source of credit and information contained shall be printed in the Account Statement / Pass Book.

Banks originating transactions shall ensure proper and meaningful details are provided in this field. Description of field 6091 is : 

M  6091  Sending customer a/c name    50x    Sender's account name

Benefit NO 08:: Almost Real time credit to Beneficiary account. The beneficiary branches have to make the payment to the beneficiaries within two hours of batch settlement time by crediting the specified account of the beneficiary or otherwise placing funds at the disposal of the beneficiary.

NEFT presently functions with a Batch+2 (B+2) return cycle. The B+2 return discipline requires  banks to afford credit to the beneficiaries' account immediately upon completion of a batch else return the transactions within two hours of completion of the batch settlement, if it is not possible to afford credits to the beneficiaries, for any reason.

Therefore, an inward credit message which is not returned within two hours from the time at which the payment instructions are processed at NEFT Centre (B+2) is treated to have been completed and credit afforded to the beneficiary's account by the beneficiary branch. It is, therefore, vital that banks systems are geared to credit within 2 hours of the batch or are re-transmitted back as return NEFT transactions in the immediate next batch itself.

Benefit NO 09:: Corporates can request their Banks to customize MIS, introduce additional filters before a NEFT credit is transmitted. The concept of virtual accounts is very popular amongst Corporates.

Benefit NO 10:: Reduce the reconciliation time from few working days to few hours.

Benefit NO 11:: Be a partner of Reserve Banks of India ‘LessCash’ Mission.

Additional Reading:

01 _ Kotak Life Insurance – Payment of Premium through NEFT
Make premium payments through your bank account using National Electronic Fund Transfer (NEFT). Log into your Net Banking, select the option NEFT transfer and enter the below mentioned details:
Beneficiary account -  99800KLIFExxxxxxxx
(The number after KLIFE would be your 8 digit Policy Number)
For example if your policy no is 00921500, the beneficiary account would be 99800KLIFE00921500
If your Policy No is less than 8 digits, please add requisite number of zeroes before the Policy No
Read more at Premium Payment Options


03 _ Optimising Commissions and Payout Mechanism For G2P Payments Under Electronic and Direct Benefit Transfer

04 _ Piloting Basic Income Transfers in Madhya Pradesh,India


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