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.

 

EPFO and NPS – Competition better for the customers

EPFO and NPS – Competition better for the customers.

What is EPFO ?

EPFO stands for Employee Provident Fund Organisation.

The Employees' Provident Fund, India Head office is at

                                                                            

Location               :      14, Bhikaiji Cama Place,

                                       Bhavishya Nidhi Bhawan,

                                       New Delhi-110 066

                                       India

e-mail                     :    cpfc@epfindia.gov.in

The Constitution of India under "Directive Principles of State Policy" provides that the

State shall within the limits of its economic capacity make effective provision

• for securing the right to work,
• to education
• and to public assistance in cases
1. of unemployment,
2. old-age,
3. sickness &
4. disablement and undeserved want.

The EPF & MP Act, 1952 was enacted by Parliament and came into force with effect from 14th  March,1952.

A series of legislative interventions were made in this direction, including the Employees' Provident Funds & Miscellaneous Provisions Act, 1952. 

The Employees' Provident Fund Organisation, India, is one of the largest provident fund institutions in the world in terms of members and volume of financial transactions that it has been carrying on.

Extracted from the Website of EPFO

Main features of the New Pension System: -

Main Features and Architecture of the New Pension System

• The new pension system would be based on defined contributions. It will use the existing network of bank branches and post offices etc. to collect contributions. There will be seamless transfer of accumulations in case of change of employment and/or location. It will also offer a basket of investment choices and Fund managers. The new pension system will be voluntary.

Extracted from the PFRDA Website.

          Recent news articles have pointed out that due to increased competition from NPS (National Pension Scheme), EPFO is in the process of transforming its customer service department.

The main features in its proposed customer service initiatives are

01)   Updating the Mobile numbers of its subscribers. This will enable EPFO to inform its subscribers of any important changes pertaining to their account. The most important being the credit of their PF amount to their Bank Account.

The next and most electrifying initiative is to gradually move to NEFT (National Electronic Funds Transfer) for its payments to its account holders, instead of the old fashioned paper cheques.

As of 26/04/2010, 95 Banks with their 67,354/- branches are part of the NEFT network.

This constitutes 95% of Indian Bank Branches, excluding the Co-operative Banks and Regional Rural Banks. So a large majority of the EPFO customer’s Bank accounts are under the ambit of the NEFT.

This is stimulating news for the growth of Volumes of NEFT and is an important step for achieving the 70%-30% dream of NPCI in the Indian Retail Payments scenario.

I foresee the following benefits that EPFO and the Indian Banking System, will accrue on switching over from the paper based cheques to NEFT

01) Faster delivery of the customer’s funds to their respective bank accounts.

02)                       Faster reconcialtion of transactions, as the NEFT transactions have to be credited at T+2 Batch settlement or Returned to the Beneficiary.

03)                       Reduced carbon print due to the reduction in paper cheques.

04)                       Huge spurt of NEFT Volumes.

05)                       New converts to ePayments, as the EPFO employees and EPFO account holders will be familiar with the benefits of NEFT.

The below table highlights the number of member claims settled by EPFO.

		MEMBERS CLAIMS SETTLED
2006-07			2007-08	2008-09
No. of Claims ( In Lakhs)			No. of Claims ( In Lakhs)	No. of Claims (In lakhs)
Provident Fund Claims	25.76		29.30	34.73
Partial Withdrawal/ Advances	3.59		3.33	3.22
Transfer Cases	2.16		2.30	2.80
Monthly Pension Claims (MPC)	3.63		3.54	4.10
Employees' Pension Claims (all other benefits)	19.29		20.95	26.59
E.D.L.I Claims	0.20		0.21	0.20
Total	51.00		56.09	71.64

This means 70lacs + transactions can immediately be part of the NEFT Cycle.

It can be observed that the number of claims settler every year is on the increase.

However, for this customer service initiative to be successful, EPFO should initially do a mass cleaning up exercise.

After the initial exercise, it is better the cycle be followed every six months or at least yearly, to shave its customer’s bank account numbers up to date.

Currently the EPFO has 5 crores subscribers spread over all over India.

As this number is very large, EPFO can concentrate on the 10 cities to clean up the Bank Account Numbers and gradually cover all its subscribers.

I suggest the following process flow:

01) Collate the Top 10 cites EPFO subscribers list.

02)                        Write to them, that EPFO is switching over to NEFT and hence request for the Bank Account numbers along with the IFS Codes.

03)                       Once 80% + of the subscribers respond, initiate a Re1/- dummy transaction, to the subscribers accounts through the NEFT.

04)                       In case of success, update appropriately in the EPFO software package.

05)                       In case of failure, inform the subscriber accordingly.

This exercise to be repeated every year.

OR,

If the above is cumbersome and costly, another option is

01) Compile the Subscribers list Bank Wise.

02)                       Filter the list to only NEFT Participant Banks.

03)                       Prepare individual bank list with complete particulars.

04)                       Forward the list to the respective controlling Bank office, with a request to inform the valid account numbers and also their respective IFS Codes.

05)                       Follow up only with those subscribers, whose bank accounts are invalid.

The above is a more simple way.

Last not but the least, the switching over from physical cheques to NEFT, is a golden opportunity for IT   Companies to be part of a major IT project.

01/04/2010 - 01 May 2010 NEFT/RTGS is working

01/04/2010 - 01 May 2010 NEFT/RTGS is working. 

Very few states are closed under Negotiable Instruments Act, on 01st May 2010

Hence, folks can safely execute their NEFT/RTGS transactions.

However, as Mumbai is closed, the number of  RTGs transactions might be a little less.

NPCI - Homepage Revamped.

National Payments Corporation of India, has revamped its website's homepage.

It has added a new background colour 

A Logo has been added - A revolving Ball in a green ring.

The NPCI Styling too has been changed.

Please find enclosed the screen-shot of the new revamped NPCI Homepage.

ayment and Settlement Systems - Vision 2009-12 Part 2

Payment and Settlement Systems - Vision 2009-12

Annual Policy Statement for the Year 2010-11

Part 2

I wish I had the time, to analyze the Annual Policy Statement for the Year 2010-11 in detail. But time and the vast subject the Statement encompasses does not permit me to do so.

So, I will try to highlights those points, which touch my heart.

In this Blog I will be concentrating on the Payments and Settlements part of the Reserve Bank of India’s Annual Policy Statement for the Year 2010-11

The policy statement relies on the Reserve Bank’s of India’s Payment and Settlement Systems  - Vision 2009-12

Policy Stance

Standardization of Security Features on Cheque Forms

What is there in it?

Cheque Truncation System (CTS)–2010 Standard with benchmark specifications for security features on cheque and field placements on cheque forms have been prescribed.

Why is this required?

Like it or do not like it, Cheques in India still play a dominant role in the funds movement. This phenomenon will last for another half-a-century. Therefore Reserve Bank of India, decided to Standardize the  Security features on cheque forms to aid n          faster processing of the cheques n          minimize fraudulent activities

How it will impact?

n          Please visit my earlier post on the Standardization of security features on cheque forms n          http://prashantnepayments.blogspot.com/search/label/Void%20%20Pantograph n          Increase automated processing thereby reducing the dependency on human. n          Increase automated processing means less turnover time for the ultimate credit to be effected to the customer. n          In the next couple of years, the reach of  CTS will be widened. To me the best benefit of CTS is its ability to transform the Post-Dated Cheques (PDC’s) process. PDC’s can be debit to the customers account i.e Loans or credit to the customer’s account i.e Dividend Payouts, Insurance Policy maturity amounts. The Truncated cheque images for future date can be stored for automatic processing on the due dates.