Cap on Outstation Cheque Collection Charges -- A subtle way by Reserve Bank of India to encourage EPayments

Reserve Bank of India, vide its. Letter dated October 8, 2008, addressed to Banks, has capped the charges on Outstation Cheque Collection Charges.

In brief, Outstation cheque collection Charges have to be:

a) Up to Rs. 10,000 not exceeding Rs. 50 per instrument
Rs. 10,000 to Rs. 1,00,000 not exceeding Rs. 100 per instrument
Rs.1,00,001 and above not exceeding Rs. 150 per instrument

More can be known at
http://www.indianexpress.com/news/Reserve Bank of Indiai-plans-to-cap-outstation-cheque-collection-charges/360377/


The main reason for capping the charges by Reserve Bank of India is to push customers to migrate to electronic modes of payment. Electronic modes of payment apart from being cost-effective shorten the collection cycle also.

The capping of charges and directive that ‘No additional charges such as courier charges should be levied’ will force Bankers, to migrate customers to Electronic modes of payment. As otherwise Bankers will have to shell out the expenses incurred above the ceiling. For example, the minimum courier cost intra-state is Rs15/-, inter-state is Rs.25/-, Speed Post Rs.35/-. Banks have no control over the courier charges. There are also issues like Cheques getting ‘lost in transit/misplaced/late-delivery’.

Further to condense the Collection Cycle, Reserve Bank of India has advised Banks to reduce the clearing cycle and to promote electronic modes of payment, the drawee banks should use electronic modes like RTGS / NEFT, wherever available, to remit proceeds to the collecting bank branch. This is like killing two targets with one stone!


Reserve Bank of India has advised Banks to make increased use of Speed Clearing and National Clearing facilities for providing efficient service.
National Clearing Service: Cheques drawn on metros and notified centers can be collected through this service.
"Speed clearing" leverages the technology of core or centralized banking solution (CBS) of banks which enables them to access details of all account holders from any branch.

In short, Reserve Bank of India vide it above circular, puts the onus on Banks to
01) Persuade customers to move to EPayments.
02) Leverage technology to be customer-centric.
03) Conserve Paper, i.e be environment friendly.

By now, all Banks must have shifted to the above Charges, and the impact on the Banks Balance Sheet, will be known on publication of March 2009, Financial Data.