RBI implemented CTS in 2014 for faster clearing of cheques. But, there still are technical or operational issues in bank system leading to delay in cheque clearing. It means loss of savings account interest. Can RBI ask banks at fault to compensate for the delay by paying the interest?

Consumers depositing cheques at bank branch before the cut-off time (usually noon) should expect to get cheque clearance by following business day. The money gets debited from cheque accountholder and credited to your account on the same day so that there is no loss of savings account interest. The cheque truncation system (CTS) was introduced to eliminate the practice of physically presenting a cheque to the payee bank, thereby substantially reducing the time for cheque clearance. However, despite using the CTS, there are examples of delays in cheque clearenace. Ironically, the bank at fault keeps the money without giving interest to the customer for the delay in clearing. How much could this amount be worth?

CTS or Image-based Clearing System (ICS) is an initiative of the Reserve Bank of India (RBI) for faster clearing of cheques. CTS is an online image-based cheque clearing system where cheque images and Magnetic Ink Character Recognition (MICR) data are captured at the collecting bank branch and transmitted electronically. It eliminates the need to move the physical instruments across branches, except in exceptional circumstances. The goal is to reduce the time required for payment of cheques and to lower the cost of transit.

One of the readers of Moneylife deposited a CTS compliant cheque in Yes bank drawn on Axis bank (his own account) on 10th March. The money was debited from Axis bank on 11th March, but credited to Yes bank only on 12th March. Similarly, he deposited a CTS compliant cheque in Yes Bank drawn on Bank of Maharashtra (again his own account) on 12th March. The money was debited from Bank of Maharashtra on 13th March, but credited to Yes bank only on 14th March. The customer made complaint to Yes Bank about loss of Rs50 saving account interest due to delay in credit given by the lender.

To his surprise, he was told that the delay was from other banks. When asked for proof, he was given extract from RBI circular. It says, “This is to inform you that due to Operational / Technical Issues at below mentioned banks they are not able to participate in today’s CTS Return Clearing Session(3)-dated 11th March 2014. As per Approval from RBI, National Payments Corporation of India (NPCI) has granted an extension to following banks for one day.” There is a list of 20 bank routing numbers along with names.

It means that cheques from these specified 20 bank routing numbers were allowed one day extension in CTS clearing. Axis Bank routing number was present and hence it proves that delay was from Axis bank. But, why does the amount get deducted from bank account if there was one day extension given? It means that Axis Bank did not give interest for one day to its customer even though the money was still with the Bank. How many such accountholders lost interest for one day?

Similar proof was given for 13th March delay in clearance. There is a list of five bank routing numbers including Bank of Maharashtra. Again, Bank of Maharashtra had debited the amount on 13th March even though it did not participate in CTS clearing. A case of bank at fault keeping the customer interest for a day! Based on the number of cheques processed, this can be a sizable amount of interest the bank gets to keep without giving it to its own customers who have the right on it.

According to the latest data available from Department of Payment and Settlement Systems of RBI, as of 31 March 2013, the banking system cleared 131.4 crore instruments (cheques) worth about Rs100.2 lakh crore.

In most cases one day interest may not be sizable amount for an individual and hence the customer will not follow-up with the bank. However, in the above case, the customer did write to Bank of Maharashtra giving details of the proof given by Yes Bank. The customer was given credit of one day interest by Bank of Maharashtra, which proves that customers today are facing not just delay of cheque clearance but also loss of bank saving rate interest for a day or more. Will RBI issue a  circular so that banks give necessary credit for loss of interest without the customer asking for it?

The same Moneylife reader deposited a cheque in Yes Bank drawn on Bank of Maharashtra and Saraswat Bank (both his own accounts) on 2nd April. There was the exact same issue with both cheque clearances. The complaint with Yes Bank yielded exact same answer with extract from RBI circular. Is it just a coincidence that Bank of Maharashtra appears again? This time the RBI circular has a list of 32 bank routing numbers which includes nationalised, private, foreign and co-operative banks.

Does it mean that the issue is now rampant? What is the exact operational/ technical issue the banks are facing? What actions are banks taking to solve the issue?

According to a report from DNA, during February 2014, in Ahmedabad, there were over 80,000 cheque instruments worth Rs750 crore delayed due to CTS clearances. “The system was introduced to make the clearing system faster and easier. But the existing manpower is still not fully trained to handle the new technology. In many cases, the scanned pictures of cheques are delivered as a corrupt file to NPCI,” the report says.

RBI will understand that it is impossible for customers to do follow-up with two banks to get credit of one day’s bank savings interest. One may even face ridicule from banks for asking for one day’s interest even though the bank at fault ends up keeping interest of thousands of cheques. CTS cheque clearance is facing delays and it does not seem to have made cheque clearance faster from customer viewpoint.

Is the RBI pushing bank consumers to use National Electronic Funds Transfer (NEFT) and Real Time Gross Settlement (RTGS) instead of writing cheques? If you are transferring big amount from one account to other own savings account, it will be wise to do RTGS. It will avoid the situation of one-day interest loss, which can be a big loss. The cost of RTGS will be lower than the pain you will suffer in getting back your one day interest loss. Will banks even share with you the RBI circular which grants one day of extension for CTS clearance?

Will RBI make the banks pay for their operational or technical issues?

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