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

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