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Thursday, August 30, 2012

Issue of Multicity / Payable at All Branches Cheques by CBS enabled Banks



                95% of India’s Public Sector Bank Branches/Private Sector Bank Branches/Foreign Bank Branches are on the CBS.

            To enable the bank customers to take full advantage of the CBS capabilities, RBI has advised All Scheduled Commercial Banks including RRBs /Urban Co-operative Banks / State Co-operative Banks /District Central Co-operative Banks, to pro-actively issue Multicity cheques.
         
                 Way back in 2007, RBI had advised Banks, that the facility of "payable at par" / "multi-city" cheques should be issued to all the eligible and requesting customers.
            Over the years, the feedback to RBI was that banks were not encouraging PAP/Multicity cheques.
                 Primary reasons for not encouraging PAP/Multicity cheques were
                    01) Decrease in float income on the CASA balances
                   02)Increase in fraudulent transactions in PAP cheques. Here, Bank customers to have a role.

The primary blocks were PAP cheques with value cap, PAP cheques only to HNI customers or levying service charges when the PAP cheques are cleared at non base-city locations.   

    However, keeping in view the enhanced infrastructure in Clearing Process and with CTS extending its scope, RBI has advised to issue only "payable at par" / "multi-city" CTS 2010 Standard cheques to all eligible customers.

           As the PAP cheques will be cleared as Local cheques in the clearing houses, no extra charges should be levied on customers.

            To minimize the associated risks, Banks have to have appropriate Board approved risk management procedures based on risk categorization of accounts

  Banks to host the updated Board approved policy on their web-site of banks and forward a copy thereof forwarded to RBI, DPSS.
           
        Issuing only PAP cheques will reduce the cheques under Speed Clearing and also reduce the TAT for clearance of the cheques. In the long run, all the players will prefer to move to ePayments, as further efficiencies are in ePayments.
           
Re-disseminated by Prashant N. Banker by daytime-Blogger by night.

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