Archive for the ‘Reserve Bank of India’ Category


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

RBI/2011 -12/516

DPSS (CO) RTGS No. 1934 / 04.04.002 / 2011-12 Dated April 20, 2012

The Chairman and Managing Director /

Chief Executive Officer of all banks participating in RTGS, NEFT and NECS

Dear Sir/Madam,

As you are aware, the 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.

2. Currently, the MICR code is available on the cheque leaf along with the IFSC code of the branch. On a review it has been decided that this information should also be made available in the passbook / statement of account of the account holders.

3. Banks are accordingly advised to take necessary steps to provide this information as indicated above in all passbook / statement of account to their account holders.

4. Please acknowledge receipt and furnish an action taken report within 15 days of receipt of the circular.

Yours faithfully,

(Vijay Chugh)

Chief General Manager

Click here to download the complete text of RBI/2011 -12/516, DPSS (CO) RTGS No. 1934 / 04.04.002 / 2011-12 Dated April 20, 2012 in PDF Format.

Source: Reserve Bank of India.


Frequently Asked Questions (FAQs) on Electronic Clearing Service

Q.1. What is Electronic Clearing Service (ECS)?

Ans: ECS is an electronic mode of payment / receipt for transactions that are repetitive and periodic in nature. ECS is used by institutions for making bulk payment of amounts towards distribution of dividend, interest, salary, pension, etc., or for bulk collection of amounts towards telephone / electricity / water dues, cess / tax collections, loan installment repayments, periodic investments in mutual funds, insurance premium etc. Essentially, ECS facilitates bulk transfer of monies from one bank account to many bank accounts or vice versa.

Q.2. What are the variants of ECS? In what way are they different from each other?

Ans: Primarily, there are two variants of ECS – ECS Credit and ECS Debit.

ECS Credit is used by an institution for affording credit to a large number of beneficiaries (for instance, employees, investors etc.) having accounts with bank branches at various locations within the jurisdiction of a ECS Centre by raising a single debit to the bank account of the user institution. ECS Credit enables payment of amounts towards distribution of dividend, interest, salary, pension, etc., of the user institution.

ECS Debit is used by an institution for raising debits to a large number of accounts (for instance, consumers of utility services, borrowers, investors in mutual funds etc.) maintained with bank branches at various locations within the jurisdiction of a ECS Centre for single credit to the bank account of the user institution. ECS Debit is useful for payment of telephone / electricity / water bills, cess / tax collections, loan installment repayments, periodic investments in mutual funds, insurance premium etc., that are periodic or repetitive in nature and payable to the user institution by large number of customers etc.

Q.3. At how many places in the country is ECS Scheme available?

Ans: Based on the geographical location of branches covered, there are three broad categories of ECS Schemes – Local ECS, Regional ECS and National ECS.

Local ECS – this is operating at 81 centres / locations across the country. At each of these ECS centres, the branch coverage is restricted to the geographical coverage of the clearing house, generally covering one city and/or satellite towns and suburbs adjoining the city.

Regional ECS – this is operating at 9 centres / locations at various parts of the country. RECS facilitates the coverage all core-banking-enabled branches in a State or group of States and can be used by institutions desirous of reaching beneficiaries within the State / group of States. The system takes advantage of the core banking system in banks. Accordingly, even though the inter-bank settlement takes place centrally at one location in the State, the actual customers under the Scheme may have their accounts at various bank branches across the length and breadth of the State / group of States.

National ECS – this is the centralized version of ECS Credit which was launched in October 2008. The Scheme is operated at Mumbai and facilitates the coverage of all core-banking enabled branches located anywhere in the country. This system too takes advantage of the core banking system in banks. Accordingly, even though the inter-bank settlement takes place centrally at one location at Mumbai, the actual customers under the Scheme may have their accounts at various bank branches across the length and breadth of the country. Banks are free to add any of their core-banking-enabled branches in NECS irrespective of their location. Details of NECS Scheme are available on the website of Reserve Bank of India at http://www.rbi.org.in/scripts/bs_viewcontent.aspx?Id=2345 .

The list of centres where the ECS facility is available has been placed on the website of Reserve Bank of India at http://www.rbi.org.in/Scripts/ECSUserView.aspx?Id=26. Similarly, the centre-wise list of bank branches participating at each location is available on the website of Reserve Bank of India at http://www.rbi.org.in/scripts/ECSUserView.aspx?Id=27

ECS (CREDIT)

Q.4. Who can initiate an ECS Credit transaction?

Ans: ECS Credit payments can be initiated by any institution (called ECS Credit User) which needs to make bulk or repetitive payments to a number of beneficiaries. The institutional User has to first register with an ECS Centre. The User has to also obtain the consent of beneficiaries (i.e., the recipients of salary, pension, dividend, interest etc.) and get their bank account particulars prior to participation in the ECS Credit scheme.

ECS Credit payments can be put through by the ECS User only through his / her bank (known as the Sponsor bank). ECS Credits are afforded to the beneficiary account holders (known as destination account holders) through the beneficiary account holders’ bank (known as the destination bank). The beneficiary account holders are required to give mandates to the user institutions to enable them to afford credit to their bank accounts through the ECS Credit mechanism.

Q.5. How does the ECS Credit Scheme work?

Ans: The User intending to effect payments through ECS Credit has to submit details of the beneficiaries (like name, bank / branch / account number of the beneficiary, MICR code of the destination bank branch, etc.), date on which credit is to be afforded to the beneficiaries, etc., in a specified format (called the input file) through its sponsor bank to one of the  ECS Centres where it is registered as a User.

The bank managing the ECS Centre then debits the account of the sponsor bank on the scheduled settlement day and credits the accounts of the destination banks, for onward credit to the accounts of the ultimate beneficiaries with the destination bank branches.

Further details about the ECS Credit scheme are contained in the Procedural Guidelines and available on the website of Reserve Bank of India at http://www.rbi.org.in/Scripts/ECSUserView.aspx?Id=1.

Q.6. What is a MICR Code?

Ans: MICR is an acronym for Magnetic Ink Character Recognition. The MICR Code is a numeric code that uniquely identifies a bank-branch participating in the ECS Credit scheme. This is a 9 digit code to identify the location of the bank branch; the first 3 characters represent the city, the next 3 the bank and the last 3 the branch. The MICR Code allotted to a bank branch is printed on the MICR band of cheques issued by bank branches.

Q.7. How does a beneficiary participate in ECS Credit Scheme?

Ans: The beneficiary has to furnish a mandate to the user institution giving consent to avail the ECS Credit facility. The mandate contains details of his / her bank branch, account particulars and authorises the user institution to afford credit to his / her account with the destination bank branch.

Q.8. Is it necessary for user institutions to collect the mandates from beneficiaries?

Ans: Yes, in addition to the consent of the beneficiaries, the mandate also provides important information related to bank account details etc. which are useful for the user institution to transfer funds to the right accounts. A model mandate form has been prescribed for the purpose and is available in the ECS Credit Procedural Guidelines.

Q.9. Is there scope for the beneficiary to alter the mandate under the ECS Credit Scheme?

Ans: Yes. In case the information / account particulars contained in the mandate undergo any change, the beneficiary has to notify the changes to the User Institution so that the correct information can be incorporated in its records. This will ensure that transactions do not get rejected at the beneficiary’s bank branch due to inconsistencies/ mismatch in the data sent by the user institution.

Q.10. Can ECS be used to transfer funds to Non Resident External (NRE) and Non Resident Ordinary (NRO) accounts?

Ans: Yes. ECS can be used to transfer funds to NRE and NRO accounts in the country. This, however, is subject to the adherence to the provisions of the Foreign Exchange Management Act, 2000 (FEMA) and Wire Transfer Guidelines.

Q.11. Will beneficiaries be intimated of credits afforded to their account under the ECS Credit Scheme?

Ans: It is the responsibility of the user institution to communicate to the beneficiary the details of credit that is being afforded to his / her account, indicating the proposed date of credit, amount and related particulars of the payment. Destination banks have been advised to ensure that the pass books / statements given to the beneficiary account holders reflect particulars of the transaction / credit provided by the ECS user institutions. The beneficiaries can match the entries in the passbook / account statement with the advice received by them from the User Institutions. Many banks also give mobile alerts / messages to customers after credit of such funds to accounts.

Q.12. What will happen if credit is not afforded to the account of the beneficiary?

Ans: If a Destination Bank is not in a position to credit the beneficiary account due to any reason, the same would be returned to the ECS Centre to enable the ECS Centre to pass on the uncredited items to the User Institution through the Sponsor Bank. The User Institution can then initiate payment through alternate modes to the beneficiary.

In case of delayed credit by the destination bank, the destination bank would be liable to pay penal interest (at the prevailing RBI LAF Repo rate plus two percent) from the due date of credit till the date of actual credit. Such penal interest should be credited to the Destination Account Holder’s account even if no claim is lodged to the effect by the Destination Account Holder.

Q.13. What are the advantages of the ECS Credit Scheme to the beneficiary?

Ans: ECS Credit offers many advantages to the beneficiary –

  • The beneficiary need not visit his / her bank for depositing the paper instruments which he would have otherwise received had he not opted for ECS Credit.
  • The beneficiary need not be apprehensive of loss / theft of physical instruments or the likelihood of fraudulent encashment thereof.
  • Cost effective.
  • The beneficiary receives the funds right on the due date.

Q.14. How does the ECS Credit Scheme benefit User Institutions?

Ans: User institutions enjoy many advantages as well. For instance,

  • Savings on administrative machinery and costs of printing, dispatch and reconciliation of paper instruments that would have been used had beneficiaries not opted for ECS Credit.
  • Avoid chances of loss / theft of instruments in transit, likelihood of fraudulent encashment of paper instruments, etc. and subsequent correspondence / litigation.
  • Efficient payment mode ensuring that the beneficiaries get credit on a designated date.
  • Cost effective.

Q.15. Are there any advantages of the ECS Credit Scheme to the banking system?

Ans: Yes, the banking system too benefits from ECS Credit Scheme such as –

  • Freedom from paper handling and the resultant disadvantages of handling, presenting and monitoring paper instruments presented in clearing. Ease of processing and return for the destination bank branches.
  • Smooth process of reconciliation for the sponsor banks.
  • Cost effective.

Q.16. Is there any limit on the value of individual transactions in ECS Credit?

Ans: No. There is no value limit on the amount of individual transactions.

Q.17. What are the processing / service charges levied under ECS Credit?

Ans: The Reserve Bank of India has deregulated the charges to be levied by sponsor banks from user institutions. The sponsor banks are, however, required to disclose the charges in a transparent manner. With effect from 1st July 2011, originating banks are required to pay a nominal charge of 25 paise per transaction to the Clearing house and destination bank respectively. Destination bank branches have been directed to afford ECS Credit free of charge to the beneficiary account holders.

ECS (DEBIT)

Q.18. Who can initiate a ECS Debit transaction?

Ans: ECS Debit transaction can be initiated by any institution (called ECS Debit User) which has to receive / collect amounts towards telephone / electricity / water dues, cess / tax collections, loan installment repayments, periodic investments in mutual funds, insurance premium etc. It is a Scheme under which an account holder with a bank branch can authorise an ECS User to recover an amount at a prescribed frequency by raising a debit to his / her bank account.

The User institution has to first register with an ECS Centre. The User institution has to also obtain the authorization (mandate) from its customers for debiting their account along with their bank account particulars prior to participation in the ECS Debit scheme. The mandate has to be duly verified by the beneficiary’s bank.  A copy of the mandate should be available on record with the destination bank where the customer has a bank account.

Q.19. How does the ECS Debit Scheme work?

Ans: The ECS Debit User intending to collect receivables through ECS Debit has to submit details of the customers (like name, bank / branch / account number of the customer, MICR code of the destination bank branch, etc.), date on which the customer’s account is to be debited, etc., in a specified format (called the input file) through its sponsor bank to the ECS Centre.

The bank managing the ECS Centre then passes on the debits to the destination banks for onward debit to the customer’s account with the destination bank branch and credits the sponsor bank’s account for onward credit to the User institution. Destination bank branches will treat the electronic instructions received from the ECS Centre on par with the physical cheques and accordingly debit the customer accounts maintained with them. All the unsuccessful debits are returned to the sponsor bank through the ECS Centre (for onward return to the User Institution) within the specified time frame.

For further details about the ECS Debit scheme, the ECS Debit Procedural Guidelines – available on the website of Reserve Bank of India at http://www.rbi.org.in/Scripts/ECSUserView.aspx?Id=25  may be referred to.

Q.20. What are the advantages of ECS Debit Scheme to the customers?

Ans: The advantages of ECS Debit to customers are many and include,

  • ECS Debit mandates will take care of automatic debit to customer accounts on the due dates without customers having to visit bank branches / collection centres of utility service providers etc.
  • Customers need not keep track of due date for payments.
  • The debits to customer accounts would be monitored by the ECS Users, and the customers alerted accordingly.
  • Cost effective.

Q.21. How does the ECS Debit Scheme benefit user institutions?

Ans: User institutions enjoy many benefits from the ECS Debit Scheme like,

  • Savings on administrative machinery and costs of collecting the cheques from customers, presenting in clearing, monitoring their realisation and reconciliation.
  • Better cash management because of realisation / recovery of dues on due dates promptly and efficiently.
  • Avoids chances of loss / theft of instruments in transit, likelihood of fraudulent access to the paper instruments and encashment thereof.
  • Realisation of payments on a uniform date instead of fragmented receipts spread over many days.
  • Cost effective.

Q.22. What are the advantages of ECS Debit Scheme to the banking system?

Ans: The banking system has many benefits from ECS Debit such as –

  • Freedom from paper handling and the resultant disadvantages of handling, receiving and monitoring paper instruments presented in clearing.
  • Ease of processing and return for the destination bank branches. Destination bank branches can debit the customers’ accounts after matching the account number of the customer in their database and due verification of existence of valid mandate and its particulars. With core banking systems in place and straight-through-processing, this process can be completed with minimal manual intervention.
  • Smooth process of reconciliation for the sponsor banks.
  • Cost effective.

Q.23. Can the mandate once given by a customer be withdrawn or stopped?

Ans: Yes. Any mandate in ECS Debit is on par with a cheque issued by a customer. The customer has to maintain adequate funds in his / her account with the destination bank branch to ensure the ECS Debit instructions are honoured when presented. In case of any need to withdraw or stop a mandate, the customer has to give prior notice to the ECS user institution well in time, so as to ensure that the input files submitted by the user do not continue to include the ECS Debit details in respect of the mandates withdrawn or stopped by customers. The process flow to be followed for withdrawing / stopping mandates is detailed in ECS Debit Procedural Guidelines.

Q.24. Can a customer stipulate a ceiling on the amount of debit, purpose or validity period of the mandate under the ECS Debit Scheme?

Ans: Yes. It is left to the choice of the individual customer and the ECS user to decide these aspects. The mandate can contain a ceiling on the maximum amount of debit, specify the purpose of debit and validity period of the mandate.

Q.25. Is there any limit on the value of Individual transactions in ECS Debit?

Ans: No. There is no value limit on the amount of individual transactions that can be collected by ECS Debit.

Q.26. What are the processing / service charges levied under ECS Debit?

Ans: The Reserve Bank of India has deregulated the charges to be levied by sponsor banks from user institutions. The sponsor banks are, however, required to disclose the charges in a transparent manner. With effect from 1st July 2011, originating banks are required to pay a nominal charge of 25 paise and 50 paise per transaction to the Clearing house and destination bank respectively. Bank branches do not generally levy processing / service charges for debiting the accounts of customers maintained with them.

Source: Reserve Bank of India- FAQs on ECSupdated on 31/01/2012


Frequently Asked Questions (FAQs) on Indo-Nepal Remittance Facility scheme

Q.1. What are the salient features of Indo-Nepal Remittance Facility Scheme?

Ans: Indo-Nepal Remittance Facility is a cross-border remittance scheme to transfer funds from India to Nepal, enabled under the NEFT Scheme. The scheme was launched to provide a safe and cost-efficient avenue to migrant Nepalese workers in India to remit money back to their families in Nepal. A remitter can transfer funds up to Indian Rupees 50,000 (maximum permissible amount) from any of the NEFT-enabled branches in India..The beneficiary would receive funds in Nepalese Rupees. Further details on the NEFT system and the NEFT-enabled branches are available on the website of Reserve Bank of India at http://www.rbi.org.in/scripts/neft.aspx.

Q.2. Is it necessary for the remitter to maintain an account with a bank branch in India?

Ans: No, this is not a mandatory requirement. Under the Scheme, even a walk-in customer can transfer funds upto Rs 50,000 by depositing the cash at the remitting bank branch.

Q.3. Does the beneficiary need to maintain an account with a bank branch in Nepal?

Ans: No, even this is not mandatory. It would, however, be ideal if the beneficiary maintains an account with a bank branch in Nepal to which the credit could be afforded. In Nepal, the Indo-Nepal Remittance Facility Scheme is handled by Nepal SBI Ltd. (NSBL). If the beneficiary does not have a bank account with NSBL or resides in a locality/ area in Nepal not serviced by a NSBL bank branch, an arrangement has been entered into by NSBL with a money transfer company in Nepal (called Prabhu Money Transfer) who would make arrangements for delivery of cash (in Nepalese Rupees) to the beneficiary.

Q.4. What are the minimum documents needed to be presented by the remitter?

Ans: If the remitting customer maintains an account with a bank branch in India, there is no need for any additional information, documents or identification. Else, the remitter has to submit documents for proof of identification such as Passport / Permanent Account Number / Driving License / Telephone Bill / Certificate of Identification issued by his employer with photograph and other details. The information will be captured in the NEFT system as part of compliance with the Know Your Customer (KYC) requirements. Complete address and telephone / mobile number of the beneficiary in Nepal will also be required.

Q.5. How do the transactions flow from India to Nepal and what are the timelines for completion of the transactions?

Ans: Remittances under the scheme for transfer of funds from India to Nepal can be originated from any of the NEFT-enabled branches in India. List of bank-wise branches participating in the NEFT system is   available on the website of Reserve Bank of India at http://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=2009.

The bank branches originating the Indo-Nepal remittance transactions under the NEFT will process it like any other NEFT transaction, the only difference being that these transactions will subsequently be pooled / collected at the designated branch of State Bank of India (SBI) in India. At the end of the day, the remittance information is conveyed electronically by SBI in a secured mode to Nepal SBI Bank Ltd. (NSBL). NSBL then makes arrangements for credit to the bank account of the beneficiary if the beneficiary is an account holder of NSBL. Else, NSBL disburses funds in cash to the beneficiary through the authorised money transfer company (Prabhu Money Transfer). The beneficiary has to approach the local branch of the money transfer company, furnish the UTR number (also called as the Unique Transaction Reference number that uniquely identifies a transaction in the NEFT system that can be obtained from the remitter), and produce a photo identity document (generally Nepal Citizenship Certificate) to prove his identity.

If the beneficiary does not approach the money transfer company within a week from the date of the transaction, the money transfer company would make arrangements for return of the remittance to the originator.

Q.6. How does the remitting customer in India know about the branches of NSBL and the outlets of Prabhu Money Transfer?

Ans: The location and addresses of NSBL and Prabhu Money Transfer are available in the Procedural Guidelines for Indo-Nepal Remittance Facility Scheme as also with the NEFT-enabled branches in India. The Procedural Guidelines for Indo- Nepal Remittance Facility Scheme are available on the website of Reserve Bank of India at http://rbidocs.rbi.org.in/rdocs/content/pdfs/84489.pdf.

Q.7. How does the remitter get back money if it is not delivered to the beneficiary?

Ans: The amount of remittance will flow back to the originating bank branch in India through the NEFT system and the bank branch would then communicate to the remitter about return of the remittance. If the remittance was originated by debit to an account, the returned amount will be credited to that account. If the remittance was made by a walk-in customer through a cash deposit, the remitter has to produce evidence of proof of remittance (counterfoil of the remittance application form) for   getting refund.

Q.8. What are the charges for availing the remittance facility?

Ans: As the facility is targeted at the migrant Nepali workers in India, concessional charges are envisaged for transfer of funds under the scheme. The charges are as under –

a. Originating bank branch in India – Maximum Rs. 5 per transaction.

b. State Bank of India in India – Rs. 20 per transaction if the beneficiary maintains an account with Nepal SBI Ltd. (NSBL). State Bank of India shares this amount equally with NSBL. NSBL would not charge any additional amount for crediting the account of the beneficiary.

 c. In case the beneficiary does not maintain an account with NSBL, an additional amount of Rs.50 would be charged for remittances up to Rs. 5,000 and Rs. 75 for remittances above Rs. 5,000.

The charges would, thus, be a minimum of Rs. 25 or a maximum of Rs. 100 depending on the value of transaction and the manner in which credit is afforded to the beneficiary.

Originating bank branches have been advised to recover the entire charges from the remitter as per the structure detailed above and pass on the appropriate amount to SBI after retaining their share (of Rs. 5).

Q.9. Are there any restrictions on the number of remittances?

Ans: Yes. An originator in India is allowed to remit a maximum of 12 remittances in a year under the scheme.

Q.10. Who can be contacted for redressal of grievances under the Scheme?

Ans: In case of complaints relating to non-credit or delay in credit to the beneficiary account or for complaints of any other nature, the NEFT Customer Facilitation Centre (CFC) of the respective bank (the originating bank and / or SBI) can be contacted. Details of NEFT Customer Facilitation Centres of banks are available on the websites of the respective banks. The details are also available on the website of Reserve Bank of India at http://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=2070 .

If the issue is not resolved satisfactorily, the NEFT Help Desk (or Customer Facilitation Centre of Reserve Bank of India) at National Clearing Cell, Reserve Bank of India, Mumbai may be contacted through e-mail  or by addressing correspondence to the General Manager, Reserve Bank of India, National Clearing Centre, First Floor, Free Press House, Nariman Point, Mumbai – 400 021.

Source: Reserve Bank of India- FAQs on Indo-Nepal Remittance Facility scheme- updated on 31/01/2012.


Frequently Asked Questions (FAQs) on US-Dollar Cheque Collection

One of the services rendered by banks as part of their normal banking operations is collection of cheques deposited by their customers, some of which could also be drawn or payable on banks that are outside the country. Such cheques are called foreign currency cheques and, presently, a significant part of these cheques are US-Dollar denominated payable by banks in the United States of America. In the interest of better public awareness, the following FAQs have been prepared for cheques denominated in US-Dollars

Ques.1. I have received a cheque denominated in US Dollars. How does such a cheque differ from the usual Rupee cheques as an instrument of payment?

Ans. Cheques denominated in currencies other than Indian Rupees such as Euro, Pound Sterling, US Dollar, Yen, etc., are called foreign currency cheques. Foreign currency cheques include demand drafts, personal cheques, banker’s cheques, cashier’s cheques, traveller’s cheques, etc. Since such cheques are not payable in India they are, therefore, required to be sent to the country concerned for realization of proceeds.

Ques.2. RBI has advised banks to frame their own Cheque Collection Policy covering various aspects relating to collection of Rupee cheques. Are there similar guidelines for collection of foreign currency cheques as well?

Ans. Cheques denominated in US Dollars (USD cheques) constitute a major share of foreign currency cheques deposited by customers for realisation. In order to make the USD cheque collection process more efficient and transparent, RBI has advised banks to refine their USD cheque collection procedures and frame their own USD Cheque Collection Policy covering aspects like mode of collection, collection period, charges for collection, etc. This policy shall be made part of their regular Cheque Collection Policy for collection of local / outstation cheques payable within India.

Ques.3. It is now clear that USD cheques are payable in USA and are required to be sent there for realisation.  But are there different modes of collecting such cheques?

Ans. Yes. There are various ways of collecting (realising) USD denominated cheques. The collection process followed by banks (presenting banks) varies depending on the institutional arrangements put in place by them. There are basically three types of arrangements adopted by banks –

i. Cash Letter Arrangement (CLA): Cheques are sent by the presenting banks in India to their correspondent banks (CBs) in USA for domestic clearing. Funds are collected (realised) by the CBs and credited to the account of the presenting bank maintained in US. Such accounts are known as NOSTRO accounts. For cheques sent under CLA the CB gives provisional credit to the bank on a pre-determined date (which varies from 7 to 9 days after tendering of cheque to the CB). However, the provisional credit will be subjected to a cooling period. After the cooling period, the customer’s account with the presenting bank in India is credited. In case of secured collection facility, the CB provides a guaranteed credit but at an additional cost.

(Cooling period is the time up to which banks wait after receiving provisional credit for the amount of cheque in their Nostro account for possible return of the cheque under provisions of the laws of USA by the drawee bank, before giving credit to the customers. Further details are available under Question 9.)

(Secured Collection is a facility extended by the CBs. Under this facility, the CBs provide guaranteed final credit without recourse within a confirmed time period unlike normal collection service. Hence the collection time period is better under this facility. CBs offering this facility normally fix a cap for the amount of individual cheques collected under the arrangement. The CBs absorb any subsequent recall of payment by the drawee bank as per US laws. . The bank offering such service charge an additional amount for giving credit without recourse.)

ii. Direct Collection Arrangement (DCA): Cheques are sent by the banks in India directly to the drawee banks in USA for collection. Usually collection services ensure receipts of clear funds i.e., risk of return is almost eliminated. Therefore, high value cheques are generally sent under collection though the time taken may be more.

iii. Final Credit Services (FCS): These services are offered by some CBs. The CB offering the service guarantees confirmed credit against the instrument. Under this arrangement banks receive final credit in their Nostro accounts without any recourse. This service normally does not have any cooling period as the cooling period is factored by the CBs before releasing the clear funds.

iv. Check-21 Facility : The System has been facilitated under Check-21 Legislation. It works more or less like CTS. When using check 21 facility, dealings are cleared utilizing the exchange of check images from bank to bank. It saves time in transit.

Ques.4. What is a Nostro Account?

Ans. A Nostro account is a bank account established in a foreign country usually in the currency of that country for the purpose of carrying out transactions there. For example most commercial banks maintain US dollar accounts with their correspondent banks in USA in order to facilitate settlement of interbank and customer transactions in US dollar.

Ques.5. What are the charges levied for the collection of these USD denominated cheques?

Ans. The charges levied by banks for collection of such USD denominated cheques are dependent on the type of collection arrangement chosen by customers and the number of intermediaries (correspondent banks) involved in the collection process. Each of the CBs will levy their own charges for facilitating the process of collection. All these charges will be in turn levied by the collecting banks in India from the customers. The customer’s account is credited net of collection charges (proceeds minus collection charges)

Ques. 6. Are US regulations applicable to USD cheque collection?

Ans.  The basic legal framework for determining rights, responsibilities and liabilities of the parties in connection with collection of USD denominated cheques drawn on US banks are governed by the legal framework as laid down under the US federal and state laws like Uniform Commercial Code (UCC) etc. However, in the event of return of a counterfeit cheque handled through this process, the drawee bank in the US has the right to recover the proceeds from presenting banks within the period stipulated under US Clearing House guidelines.

Ques. 7. Can the customer choose the mode for collecting USD cheques ?

Ans. Yes. Banks have been advised to make their USD Cheque Collection process transparent. Various modes of collection along with the timeframe and charges for collection shall be covered therein. Customers could request for any of the collection modes specified in the USD Cheque Collection Policy based on need, convenience and cost involved.

Ques. 8. Just as RBI has mandated a timeframe for collection of Rupee cheques, is any timeframe stipulated for collection of USD cheques too ?

Ans. Timeframe for collection of USD cheques will vary depending on the collection mode. The date of credit to the account of the customer will be reckoned based on the date of credit (value date) to the Nostro Account of collecting banks and the cooling period. The time taken by banks for collection of USD cheques normally ranges from 15 to 30 days and may go up to 45 days depending upon the collection arrangement and place at which the instrument is payable. The diversity in the banking and payment systems in USA and laws governing cheque transactions have a significant bearing on the collection time. Based on the mode of collection, banks have been advised to indicate the period for collection of USD cheques in their USD Cheque Collection Policy. The transit time may be reduced by 2 to 3 days by sending the cheques the same day from branches to centralised pooling branch and centralised pooling branch to Correspondent Banks. However, banks have also been advised to explore using faster methods of realisation such as leveraging on Check-21 facility in the US for saving in transit time.

Ques. 9. It appears that the cooling period has a major impact on collection time?

Ans.  Yes. Cooling period is the time up to which banks wait after receiving provisional credit for the amount of cheque in their Nostro account for possible return of the cheque by the drawee bank under the provisions of the US laws, before giving credit to the customers. Cooling period is dependent on the mode and area of collection and varies from 5-8 days for cheques in New York area and 15-21 days for other cities collected under CLA mode. However, under the FCS mode, banks receive final credit in their Nostro account without any recourse to recall. It does not involve cooling period as this is already factored into by the CBs before releasing the final credit

Ques. 10. Are customers given credit and allowed to use the funds after sight of credit in the Nostro accounts of banks?

Ans. No. The collecting banks credit the customer’s account only after expiry of the cooling period as such funds are subject to recall under US laws. Some banks may permit selective withdrawal of funds before the cooling period lapses depending on the customer’s credit worthiness, relationship with the bank, KYC compliance, value of the cheque, etc. It is a commercial decision of the bank. Banks have been advised to formulate their policy on instant credit for small value cheques as part of the USD Cheque Collection Policy.

Ques.11. Funds are credited to the customers’ accounts after the cooling period though funds are resting in the Nostro accounts of collecting banks during the period. Is there any compensation for customers?

Ans. Yes. Banks have been advised to pay interest on the amount of cheque on a value-date concept from the date of sighting of credit in their Nostro accounts till such time the credit is actually afforded to customers’ accounts. Interest shall be paid minimum at the Savings Bank rate calculated on the amount of proceeds credited to the customers’ accounts.

Ques.12. Will the customer be compensated for delay in collection beyond the collection period indicated in the Cheque Collection Policy of the bank ?

Ans.  Yes. Compensation by way of additional interest will be paid on to the customer for delay in collection beyond the declared collection period as per the bank’s policy and such interest shall be on “step-up basis” for the period of delay. The compensation shall be paid automatically without the customer requesting for the same

Ques.13. What are the instructions for facilitating customer awareness and redressing customer complaints ?

Ans.  Banks are required to make their USD Cheque Collection Policy transparent covering all the relevant aspects detailed above. Banks are also required to widely disseminate the policy by displaying at their branches, on their website, etc.. A copy of the policy will be available with the Branch Manager for the customers to go through. Banks have been advised to look into and redress customer complaints like delay in collection / receipt of proceeds, etc. Customers may resort to the redressal mechanism put in place by RBI under the Banking Ombudsman Scheme, 2009 for any complaints.

Ques.14. Are there any other instructions to banks in this regard ?

Ans.  RBI has recommended the following steps to banks for reducing the timeframe for collection of USD cheques –

  • Review the collection policy on an on-going basis so as to explore faster methods of realisation.
  • Reduce the transit period for movement of cheques from the collecting branches to the centralised pooling branch and from the centralised pooling branch to CBs.
  • Explore feasibility of forming / pooling cheques of various collecting banks to a common service bureau to avail benefits arising out of increased volumes, reduced infrastructure costs, etc.
  • Explore the possibility of leveraging on Check-21 facility.
  • Use of efficient and reliable courier / postal service.

Ques.15. Do I have recourse to any other arrangement for collection (realisation) of USD cheques if I am in urgent need of proceeds?

Ans. Yes. The customer can approach the bank to discount or purchase the cheque. It needs to be appreciated that the charges for purchase / discount will be significantly higher because the bank will be parting with the proceeds before realising the cheques. The charges will vary depending on when the request for discount / purchase is made by the customer and the period for which the bank is out of funds

DISCLAIMER: The FAQs have been prepared for the general awareness of customers based on the broad guidelines / recommendations given by RBI to banks on the USD Cheque Collection Policy. Customers are requested to refer to the Cheque Collection Policy formulated by their respective banks or contact the branch manager for specific details.

Source: Reserve Bank of India- FAQs on US-Dollar Cheque Collection- updated on 31/01/2012


Frequently Asked Question (FAQs) on RTGS System

Q1. What is RTGS System?

Ans. The acronym ‘RTGS’ stands for Real Time Gross Settlement, which can be defined as the continuous (real-time) settlement of funds transfers individually on an order by order basis (without netting). ‘Real Time’ means the processing of instructions at the time they are received rather than at some later time. ‘Gross Settlement’ means the settlement of funds transfer instructions occurs individually (on an instruction by instruction basis). Considering that the funds settlement takes place in the books of the Reserve Bank of India, the payments are final and irrevocable.

Q2. How RTGS is different from National Electronics Funds Transfer System (NEFT)?

Ans. NEFT is an electronic fund transfer system that operates on a Deferred Net Settlement (DNS) basis which settles transactions in batches. In DNS, the settlement takes place with all transactions received till the particular cut-off time. These transactions are netted (payable and receivables) in NEFT whereas in RTGS the transactions are settled individually. For example, currently, NEFT operates in hourly batches – there are eleven settlements from 9 am to 7 pm on week days and five settlements from 9 am to 1 pm on Saturdays. Any transaction initiated after a designated settlement time would have to wait till the next designated settlement time Contrary to this, in the RTGS transactions are processed continuously throughout the RTGS business hours.

Q3. Is there any minimum / maximum amount stipulation for RTGS transactions?

Ans. The RTGS system is primarily meant for large value transactions. The minimum amount to be remitted through RTGS is ` 2 lakh. There is no upper ceiling for RTGS transactions.

Q4. What is the time taken for effecting funds transfer from one account to another under RTGS?

Ans. Under normal circumstances the beneficiary branches are expected to receive the funds in real time as soon as funds are transferred by the remitting bank. The beneficiary bank has to credit the beneficiary’s account within two hours of receiving the funds transfer message.

Q5. Would the remitting customer receive an acknowledgement of money credited to the beneficiary’s account?

Ans. The remitting bank receives a message from the Reserve Bank that money has been credited to the receiving bank. Based on this the remitting bank can advise the remitting customer that money has been delivered to the receiving bank.

Q6. Would the remitting customer get back the money if it is not credited to the beneficiary’s account? When?

Ans. Yes. It is expected that the receiving bank will credit the account of the beneficiary instantly. If the money cannot be credited for any reason, the receiving bank would have to return the money to the remitting bank within 2 hours. Once the money is received back by the remitting bank, the original debit entry in the customer’s account is reversed.

Q7. Till what time RTGS service window is available?

Ans. The RTGS service window for customer’s transactions is available from 9.00 hours to 16.30 hours on week days and from 9.00 hours to 13.30 hours on Saturdays for settlement at the RBI end. However, the timings that the banks follow may vary depending on the customer timings of the bank branches.

Q8. What about Processing Charges / Service Charges for RTGS transactions?

Ans With a view to rationalize the service charges levied by banks for offering funds transfer through RTGS system, a broad framework has been mandated as under:

a) Inward transactions – Free, no charge to be levied.

b) Outward transactions –

Rs. 2 lakh to Rs. 5 lakh – not exceeding Rs. 30 per transaction.

Above Rs. 5 lakh – not exceeding Rs. 55 per transaction.

Q9. What is the essential information that the remitting customer would have to furnish to a bank for the remittance to be effected?

Ans. The remitting customer has to furnish the following information to a bank for effecting a RTGS remittance:

  1. Amount to be remitted
  2. Remitting customer’s account number which is to be debited
  3. Name of the beneficiary bank
  4. Name of the beneficiary customer
  5. Account number of the beneficiary customer
  6. Sender to receiver information, if any
  7. The IFSC Number of the receiving branch

Q10. How would one know the IFSC code of the receiving branch?

Ans. The beneficiary customer can obtain the IFSC code from his bank branch. The IFSC code is also available on the cheque leaf. The IFSC code is also available on the RBI website (http://rbidocs.rbi.org.in/rdocs/RTGS/DOCs/RTGEB1110.xls). This code number and bank branch details can be communicated by the beneficiary to the remitting customer.

Q11. Do all bank branches in India provide RTGS service?

Ans. No. All the bank branches in India are not RTGS enabled. As on September 29, 2011, there are more than 78,000 RTGS enabled bank branches. The list of such branches is available on RBI website at http://rbidocs.rbi.org.in/rdocs/RTGS/DOCs/RTGEB1110.xls.

Q12. Is there any way that a remitting customer can track the remittance transaction?

Ans It would depend on the arrangement between the remitting customer and the remitting bank. Some banks with internet banking facility provide this service. Once the funds are credited to the account of the beneficiary bank, the remitting customer gets a confirmation from his bank either by an e-mail or sms.

Q13. Whom do I can contact, in case of non-credit or delay in credit to the beneficiary account?

Ans Contact your bank / branch. If the issue is not resolved satisfactorily, complaint may be lodged to the Customer Service Department of RBI at –

The Chief General Manager,

Reserve Bank of India,

Customer Service Department,

1st Floor, Amar Building, Fort,

Mumbai – 400 001

Or send email

Q14. How can a remitting customer know whether the bank branch of the beneficiary accepts remittance through RTGS?

Ans. For a funds transfer to go through RTGS, both the sending bank branch and the receiving bank branch would have to be RTGS enabled. The lists are readily available at all RTGS enabled branches. Besides, the information is available at RBI website (http://rbidocs.rbi.org.in/rdocs/RTGS/DOCs/RTGEB1110.xls). Considering that more than 74,000 branches at more than 20,000 cities/ towns / taluka places are covered under the RTGS system, getting this information would not be difficult.

Source: Reserve Bank of India- Frequently Asked Question (FAQs) on RTGS System- updated on 31/01/2012.