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Economy

RBI Makes Payable-At-Par Cheques (Nearly) Mandatory

In a notification, RBI has mandated that Banks with core banking systems (that is, most banks) must offer cheques that will be payable at par (that is, not intra-city or inter-city collection charges) for all their customers in applicable branches.

3. On a review of the practice followed by banks in this regard, it has been observed that banks are issuing these types of cheques differently. While a few banks are issuing “payable at par” / “multi-city” cheques with value cap, some other banks issue these cheques as per category of account (High Net-worth Customers). Instances of levying intersol charges when such cheques are cleared at other than the base branch city have also come to our notice.

4. Taking into consideration the availability of processing infrastructure for clearing outstation cheques at all clearing locations across the country and to bring about further efficiency in cheque clearing, all CBS enabled banks are hereby advised to issue only “payable at par” / “multi-city” CTS 2010 Standard cheques to all eligible customers. Appropriate Board approved risk management procedures based on risk categorization of accounts may also be put in place. Since such cheques (payable at par) are cleared as local cheques in clearing houses, customers should not be levied extra charges. The updated Board approved policy of banks in this regard may be placed on the web-site of banks, customers notified and a copy thereof forwarded to us.

This means that you and I have a right to demand p-a-p cheque books at no charge (certain banks gave them only to select customers). And, there will be no clearing costs for these cheques (so I can pay a person in Mumbai or Delhi without them incurring a cost to clear from my Bangalore account).

Banks had earlier been advised to do this anyhow, but being banks, they wanted to keep levying clearing charges if they could. Cheques supposedly cost Rs. 18 to clear per cheque, and the new truncation laws would only have cut a small part of that cost. Yet, banks have to offer clearing services for free, and where it costs them next to nothing, in NEFT or RTGS, they levy charges. It’s all topsy turvy, if you ask me.

While this rule is consumer friendly, it might be time to have a relook at the system. Perhaps a case can be made to charge cheque issuers in big cities to a person in a big city. And incentivize them to use the NEFT/RTGS/IMPS type of online transfer services.