Printing of MICR Code and IFSC Code on Passbook/Statement of Account

RBI, DPSS has announced another customer-friendly initiative. It has advised all Chairman and Managing Director / Chief Executive Officer of all banks participating in RTGS, NEFT and NECS to make arrangements for Printing of MICR Code and IFSC Code on Passbook/Statement of Account

The relevant RBI notification can be accessed here.

The display of MICR Code and IFSC Code is presently available only on the Cheque leaf of the account holder.

MICR code is necessary for all Electronic Clearing Service (ECS – Credit and Debit) transactions.

Similarly, the IFSC code is a pre-requisite for NEFT and RTGS transactions.

To improve customer efficiency levels and to ensure a high success rate for ePayments, RBI has advised Banks to take necessary steps to provide this information as indicated above in all passbook / statement of account to their account holders.

The respective Banks have to furnish to RBI, an action taken report within 15 days of receipt of this circular.

3 immediate benefits of this RBI Notification.

1. Bank customers have an additional authenticated source of MICR/IFSC Code.
2. Ease in sharing MICR/IFS Code with any remitters.
3. Increase in success rate for ePayments.

50% Off – Indian Cheques, Drafts, Pay Orders life slashed from 6 months to 3 months

Well, the day of reckoning has finally come. From 01/04/2012, the lifespan of Cheques, drafts will be reduced from 6 months to 3 months.

This is in accordance with the RBI notification dt04/11/2011.

5 Points of this change:

1. All Cheques,Drafts I.e paper based clearing instruments will be affected.
2. The lead time of 4 months+, has enabled all the players in the financial market to be acquainted with the new rules.
3. This will increase the efficiency in the Cheque Collection process, as the lead time has been lessened.
4. This will reduce the inefficiencies associated with post-dated cheques.
5. This will encourage migration to electronic Payments, ePayments are instant

15 practices in other parts of the world.

Cheque/Drafts are valid for a certain amount of time after the date of issued.

The following are the Cheques/Draft validity rules in major countries of the world

1. Australia : - Cheques - Most banks in Australia accept cheques regardless of the date. Bank drafts expire after 6 months. After 6 months upto years, the drafts can be presented directly to the issuing Australian bank.

2. New Zealand - 6 months

3. Brazil – Cheque/Drafts 6 months

4. China - Cheques still not popular

5. France - One year, one week, and one day (373 days)

6. Germany - Cheques - Presentation period is eight days. However, a cheque is valid without time limit unless revoked by customer. Draft - No time limit

7. Greece – Cheque/Drafts 5 years
   
   
8. Italy - Cheques - No time limit. Bank Drafts - 30 days

10. Indonesia – Cheque/Drafts 90 days

11. Japan – Cheques are very rare.
    
    
12. Spain - Cheques/Drafts - No time limit

13. Portugal - Cheques 8 Days
    
    
    14) Switzerland - Cheques are valid for six months and eight days from date of issue. However, after this period, they still can be be cleared by special arrangement with the issuer or his/her bank manager. Bank draft validity periods - 6 months

15. United States of America - Cheques are valid, legally, for six months, then can be considered “stale dated”. A peculiar feature of USA banking rules, is that the Cheques may be returned for a period of seven years for fraud or forged endorsements. There is no time limit for encashment of drafts, but after 6 months, drafts are paid with extra due diligence. 

Preserve your Charge Slips-Do not destroy them immediately

Preserve your Charge Slips-Do not destroy them immediately

The Indian Banking retail customers are swiftly migrating from cash to credit/debit cards payments via the online mode/mobile mode/POS mode.

Charge Slips are the connecting node between the Payment and the Bank Account in case of POS mode.

Charge slip refers to the voucher printed after swiping and charging a debit or credit card.

With multiple Debit/Credit cards, becoming common ‘Charge Slips’ play an important role in reconciliation of the multiple Debit/Credit Cards

Majority of the POS Paper rolls are thermal based. As such, the Data printed on the POS Paper Rolls fades over a period of time. Hence, in case permanent record of the POS Slip is required, scanning is the best option.

However, it is wise to preserve the Charge Slips, till at least the Credit Card Statement or the Bank Account Statement is received. 

Once the Statement is reconciled and you are satisfied that all the Debits are genuine debits, the charge slips can be destroyed.

Tips for Storage and Image Stability

1.     Keep Dry

2.     Avoid Plastics/Solvents

3.     Avoid Sunlight

4.     Avoid Hot/Humid temperature

5.     Avoid Diaso Papers

6.     Do not Iron/Deface

Dispute Resolution Mechanism under the Payment and Settlement Systems Act, 2007

Dispute Resolution Mechanism under the Payment and Settlement Systems Act, 2007

As the numbers of transactions in the Payment Systems are on the increase, it is but natural that the complaints too should rise.

A number of complaints found their way to Reserve Bank of India, DPSS for an amicable solution.

To bring in Uniformity and transparency amongst the Dispute Settlements, RBI DPSS has issued detailed guidelines.

The same can be accessed @

http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=6009&Mode=0

The relevant Notification Number is:  RBI/2010-11/213/DPSS.CO.CHD.No.654/03.01.03/2010-2011 dt.         September 24, 2010

QUOTE

01) Scope of the Dispute Resolution Mechanism will generally be limited to interpretation, scrutiny and resolution of disputes within the ambit of rules, regulations, operational and procedural guidelines relating to the payment products, various instructions issued by the system providers, instructions and directions issued by RBI, etc., from time to time.

02) Use of the mechanism will not be resorted

a) to deal with aspects relating to acts of system participants (or providers) that are prima-facie fraudulent or

b) are internal to their operations or

c) outside the payment and settlement system infrastructure.

03) The Dispute Resolution Mechanism will also not cover disputes

a) between system participants and their customers (ultimate users),

b) between members of the payment systems and their sub-members

c) or between sub-members themselves.

UNQUOTE

The highlights of this Notification are:-

The various products under the Payments and Settlement Systems are divided into 3 broad areas viz:-

a) Clearing House-related activities, including paper (cheques) and retail electronic (ECS) payment products

b) Products those are national in character viz. National Electronic Clearing Service (NECS), National Electronic Funds Transfer (NEFT) and Real Time Gross Settlement (RTGS) system

c) All other payment systems (other than those operated by RBI) like CCIL, NPCI, ATM networks, cross border money transfers, cards, etc.

The PRD (Panel for Resolution of Disputes) should dispose of the dispute, within 15 working days of receiving the same.

Likewise, the Appellate authority too has to dispose of the Appeals, within 15 working days.

            The Dispute Resolution mechanism should lead to greater understanding of the functioning of the Payments and Settlements Act 2007, amongst all the state-holders. As more and more Disputes are resolved, the efficiency of the Payments System will increase. This will attract new customers and new transactions, into the Payment Systems ambit.

ECS Debit – Return Reasons

ECS Debit – Return Reasons

It is observed that the number of ECS Transactions being RETURNED by the Destination Banks are  on the increase.

Your ECS Debit transaction can be rejected by your Banker for the following reasons

As per RBI’s Electronic Clearing Service (Debit Clearing) Procedural Guidelines, the following are the Standard Return Reasons.

Code No.        Reasons for Return

1.                    Account since closed / transferred

Explanation: - Account since closed – The destination account has been closed. Obviously, this has to be returned.

Account Transferred: This reason was valid in a de-centralised environment, when the ECs transactions were being routed to the base branch.

However, under CBS this is a very sparingly used Return Reason.

2.                    No such account:

Explanation: The account number in the ECS Transaction is not in the Destination bank’s books.

Potential causes: The customer’s account has been migrated to the CBS domain, and a new number allotted. However, the ECS transaction is still coming with the old Account number.

3.                    Account description does not tally

Explanation: The account holder’s name in the destination bank and the account holders name in the ECs transaction do not match.

This is a very rare reason, as the Account description is tallied at the time of the Mandate Acceptance by the Destination bank.

4.                    Balance insufficient

Explanation: Simple, inadequate balance to debit the ECS transaction amount. It is to be noted, that there should be sufficient balance at the time of the debit, and not during the business day. For eg: When the destination account is debited with the ECS transaction at 11.30am, 14/07/2010, sufficient balance should be there. It is of no use, if there was sufficient balance at 10.00am or 2.00pm on the same day.

5.         Not arranged for / exceeds arrangements

Explanation: This reason is used for Overdraft Accounts, where the drawn balance exceeds the available balance.

6.         Payment stopped by drawer

Explanation: The destination account holder has instructed his/her banks for  Stop Payments of the Particular ECS Transaction.

Potential causes: Dispute between the account holder and the Beneficiary. Loan account is closed, but still the ECS transactions are being routed.

7.         Payment stopped under court orders

Explanation: The message is clear, Payment stopped under court orders

8.         ECS mandate not received

Explanation: The Destination bank has not received the ECS Mandate.

ECS Mandate is the Debit Authorisation by the customer to the bank.

9.                    Miscellaneous (to be specified)

Explanation: Ah, this is the most exciting or treacherous Return Reason

Will explain in detail in tomorrow’s post

CTS – Process Flow for PDC’s (Post Dated Cheques)

CTS – Process Flow for PDC’s (Post Dated Cheques)

PDC’s are an integral part of the Indian Banking system. It is observed in spite of ECS (Debit), being popular, the rise of PDC’s is on the increase.

What is a Post Dated Cheque ?

·        A cheque with a future date entered.

·        The cheque cannot be cashed until that date is reached.

What could be the reason for the same?

The following could be some of the answers for the rise of PDC’s.

01)                      To set up a ECS Debit Mandate, the processing time is 7-14 days. This means a loan cannot be disbursed till the ECS Debit Mandate is in place. Usually the borrowers are not inclined to wait 7-14 days, to receive the Loan Proceeds.  Hence, they prefer to issue PDC’s for the Loan Tenure.

02)                     Now-a-days, majority of the Retail Loans (i.e Auto, Personal, Home) are hawked by DSA’s (Direct Sales Agents). And, DSA’s achieve their target only when the Loans are actually disbursed. Hence, they too are comfortable with PDC’s only.

03)                     Speed clearing has picked up at major Metros, at least for Private sector bank Branches. This aids in quick processing of cheques drawn on remote branch locations too.

04)                     And, for Check Bounce cases, the RETURN MEMO is of paramount importance, to pursue for recovery of the Loan dues.

Therefore cheques as a mode of settlement of Loan’s will continue to be the preferred mode of repayment.

Handling of PDC’s under the CTS scenario will : -

/ be simplified

// be accurate

///  lead to reduction of the TAT.

Present Scenario: -

·        Collect the PDC’s of all the Bank Borrower accounts – the pooling location depends on the Individual banks, whether centralized or de-centralized or hub and spoke model etc.

·        Segregate the PDC’s month-wise at the pooling location.

·        Present the PDC’s on the respective dates. The actual work commences in the background, at least 2 weeks prior to the Presentation date.

It is observed that the common date for PDC’s is the 7^th of every month. As a matter of convenience, Banks tend to present the cheques from 7^th to 10^th of the month, in order to avoid clubbing of all bank’s PDC’s on a single date.

Process the Returns, and affect the credits.

Proposed Scenario under CTS:

·        The PDC’s are scanned and converted into CTS ready images.

·        CTS Batches are created according to the Presentation date.

·        Once the CTS batches are created as per the Presentation date, no further processing is required till a couple of days before the actual presentation date.

·        On the presentation date, the CTS Batches are presented as part of the CTS cycle.

·        Process the Returns, and affect the credits.

·        The only hitch will be the removal of the CTS Images in case there is a request for non-presentation of any particular cheque. This also is not a major issue, as in the present scenario too; there are requests for non-presentation of a particular cheque, for a particular PDC cycle.

·        The most significant feature here is the menace of closed accounts. Removing cheques of closed accounts in a physical PDC cycle is tedious and time-consuming. But in case of CTS, a simple action will remove the CTS Images of the closed accounts instantly.

                     Even if the CTS images are not removed from the CTS Cycle, the automated CTS processing system will eliminate them in the first instance itself.

In the above scenario, there will be major benefits in

01)Transportation cost of the PDC’s from one location to another location.

02)                     Storage cost, as all physical PDC’s can be stored at a single pan Indian location, instead of multiple locations.

03)                     Retrieval of a physical PDC will be smoother, as all PDC’s will be at a single location only.

 

New NEFT Features from 01/03/2010(01 March 2010) - Tightening of Return Window

New NEFT Features - Tightening of Return Window

One of the key features of the New NEFT features from 01/03/2010 is the

Tightening of Return Window

·        Presently, the NEFT procedural guidelines mandate banks to return NEFT transactions in the very next available batch.

·        Prior to 01/03/2010, the NEFT system had been designed to allow destination banks to return transactions on a T+1 basis. The traffic analysis has revealed that a major chunk of returns are effected by banks either in the last batch of the day or in the first batch of the next day, indicating that the transactions are processed by the destination batches only at the end of the day instead of batch-wise.

·        In order to streamline the system and complete the processing cycle on a near-real-time basis, the concept of return within two hours of completion of a batch is being introduced.

·        The B+2 return discipline would require banks to afford credit to beneficiary accounts immediately upon completion of a batch or else return the transactions within two hours of completion of the batch settlement, if credits are unable to be afforded for any reason.

The complete Notification can be accessed @

http://rbi.org.in/scripts/NotificationUser.aspx?Id=5489&Mode=0

It has been more than 3 weeks since the new regulations went Live. And, the response to this new change is a mixed bag.

Of course, I am sure, lots of thought and brain-storming must have proceeded, before the introduction of B+2 return discipline.

Only time will tell, whether this feature is a success or a failure.

With Straight through Processing and Payee Name Validation, majority of the NEFT Inwards will be automatically routed to the destination account.

The major issue is the keying of the wrong account in the Beneficiary Account Number field. This error can occur at the Data entry level by the bank employees or providing wrong account number of the beneficiary by the Sender.

I feel one more validation should be introduced at the SFMS Gateway level itself.

--- At present 86+Banks participate in the NEFT Settlement Cycle.

15 Banks contribute to 75% of the volumes.

All this 15 Banks are on CBS(Core Banking Solution) i.e the Digits in the Customer Account Number are standardized across the bank, irrespective of the Product Code..

Eg: ING Vysya Bank -  12 Digit Account Number

Andhra Bank – 15 Digit Account Number.

South Indian Bank – 16 Digit Account Number

Union Bank of India – 15 Digit Account Number

Bank of Baroda – 14 Digit Account Number

                                                                              

The above data has been drawn from personal experience and the internet, the number of digits might be wrong. However this is not the point here.

The NEFT program should have an online verification of the Digits in the Beneficiary’s Banks Account number.

For eg: If an NEFT transaction is being executed from Andhra Bank account to ING Vysya Bank account, the NEFT Application should validate the ING Vysya Bank’s Account for 12 digits and than only the transaction should proceed.

This will minimize NEFT transactions with less than or more than the ING Vysya Bank’s CBS account number being transmitted, which in turn will reduce RETURNS.

Is this feasible?

Yes, 100% feasible.

Only an additional table in the NEFT Application is required, which has to be periodically updated as and when the data is received fro the Participant Banks.

Once Banks move to CBS, it will be very rare for the whole Account Number mechanism to change. Hence, only a one time exercise will suffice.

Process Flow:

01) A New Table is introduced in the NEFT Application – Banks CBS Account Digits

02)                       It is populated with the number of digits of CBS Accounts of the respective Banks

03)                       On a NEFT Inward (NO6), being received for a particular bank, the Digits in the Account Number field is cross-checked for the correct number.

04)                       If the digits in the Beneficiary Account number field match with the NEFT Master, the transaction is processed further.

05)                       IF the digits in the Beneficiary Account number field DO NOT match with the NEFT Master, the transaction is rejected at SFMS Level only with the reason INVALID Account number.

This is only a preliminary approach, and can be fine-tuned after brainstorming.

Tit-Bit- - Income Tax-Electronic Mails

Income Tax-Electronic Mails

The fraudsters have a found out a new way, to gain access to credit card numbers along with the CVV number.

They have targeted mass mails to folks, as if the originator is the IT Deparment  

As per the contents of the Mails, the IT Department has requested for Credit Card Details, to process the Income Tax Refunds!!

Luckily, the media has widely published articles warning people not to fall prey to the fake mails.

Income Tax Department, too has released advertisements in leading newspapers, warning people of the bogus mails.

The Press Release of Income Tax Department can be accessed at 

http://www.incometaxindia.gov.in/archive/CBDT_PressRelease_09102009.pdf

As the ePayments gains popularity in our country, the scam-esters too resort to new thoughts, to expand their business!!

Hence, the users should be more careful, while parting with their data.

Dividend Payouts – ePayment Mode

  

 Dividend Payouts – ePayment Mode

During the last couple of months, Companies have been declaring Dividends and remitting the same, to their shareholders.

In India, the chief modes of Dividend Remittance is through

01) Paper Based i.e Cheques

02) ePayments i.e Electronic Clearing Service(ECS)/ National Electronic Clearing Service(NECS).       Apart from the above two ePayment Options, the third emerging trend is NEFTmode.

 /20ratio between Paper bases and rough

 shareholders.

It is observed that the ratio between Paper based and ePayment based transactions is  80/20.

To increase the ratio of ePayments over Paper Based, both the Companies and shareholders, should work together. However, as the benefits of ePayments are more to the companies, the companies should take the lead.

E – Dividend

This is an automated system of dividend payment into investors account through electronic device without physical cheques. Though an emerging concept in the domestic capital market, it offers several advantages over the usual cumbersome printing and posting of paper based dividend warrants. E-dividend comes with a lot of attendant benefits;

01) There is increased transparency in the administration of dividend payment.

02) Eliminates the cost and stress associated with printing and posting of dividend warrants thereby reducing total cost of dividend processing.

03) Faster and more secured dividend payment delivery.

04) Reduces incidents of unclaimed dividends.

05) More investors will be attracted into the capital market.

06) Happier investors as dividends are received conveniently and promptly.

07) 24 hour processing which gives next day value to the investor.

The following enquires related to Paper-Based Dividends can be minimized:-

1.    Stale Dividend Warrant requiring revalidation.

2.    Returned unclaimed warrants.

3.    Non-Receipt of dividend after six month.

4.    Non-Receipt of a particular Dividend Payment.

5.    Loss/Missing Dividend Warrant.

6.    Short or over-payment of dividend warrants.

7.    Mutilated warrant or partly torn warrant, or warrant with wrong spelling of name and omission of        shareholders title.

However, Companies should have a robust investor grievance cell, to respond to

1    Enquiries in respect of paid dividend warrants.

2.    Enquiries on E – dividend.

As a first step, Banks should distribute their Dividend only in ePayment Mode.

List of NEFT IFSC’s of Bank Branches – Bank Wise List

List of  NEFT IFSC’s of  Bank Branches – Bank Wise List

What is IFSC code and where would I get it?

Answer:
Indian financial system code (IFSC) means a unique code of 11 digits of the NEFT enabled branches. Normally, this code will be printed on the cheque book OR it may be obtained from the branch where the account is maintained. 

For more details of the meaning of IFSC’s and a brief history of IFSC’s in our country, o visit

http://prashantnepayments.blogspot.com/2009/01/tips-for-instant-rtgs-credit.html

IFSC Code can be compared to the Pincode of Indian Posts. Mentioning the correct Pincode will enable the letter to reach the correct destination faster. Mentioning the correct IFSC Code in a NEFT Transaction will enable the NEFT Transaction to be credited correctly and faster.

In a Core Banking Scenario, wherein all the Bank Branch Accounts are centralized, ideally the IFSC Code is irrelevant. However, Banks advise the correct IFS Code to be mentioned in the transaction, for easy resolution of disputes, if any.

At present, the IFSC Codes are printed on the below left corner of the beneficiary cheque.

However, cheque books are not readily available for immediate reference.

Hence, another source of IFSC Codes, is the respective Bank site.

But the best source is the Reserve Bank of India Site.

The link for the Bank wise IFSC Codes is as under

http://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=2009

As the excel data is Bank-wise, the download size is also low. The above data is very useful, for executing NEFT Transactions.

Mention the Correct IFS Code and Account Number for immediate ePayment Credits