Core banking: RBI’s half-baked directions to banks

RBI has just come out with guidelines for issuance of “Payable at par/Multi-city” cheques to all eligible customers in a standard format. But the RBI should have thought of many other possibilities of offering a wide variety of services using CBS. Here is a list of benefits it could have allowed


Almost all the banks in our country have introduced “core banking solutions” (CBS), under which, all the branches of each bank are centrally inter-connected. This provides the flexibility of operating a bank account opened in one branch of a bank in any of the other branch of the same bank. But the full benefits of CBS are yet to percolate down to the banking public, as banks, barring a few, are generally slow in passing on the benefits to the banking public unless goaded by the banking regulator. As a first step in this direction, RBI has just come out with guidelines for issuance of “Payable at par/Multi-city” cheques to all eligible customers in a standard format, so that they are honoured, if otherwise in order, when presented at all different centres though the clearing houses as if they are local cheques. Since such cheques (payable at par) are cleared as local cheques in clearing houses, RBI has directed that customers should not be levied any extra charges for this service.
 

This is no doubt a good beginning, but the RBI should have thought of many other possibilities of offering a wide variety of services using CBS and issued a comprehensive circular covering all aspects at one stretch which would have served the cause of bank customers admirably. Here is a list of important and very useful services, which could be made available to the public through the use of CBS at little or no additional cost to the banks.
 

Payable at par/Multi-city cheques

The RBI has just directed banks to offer issuance of payable at par/multi-city cheques without any charges. But there is a catch here. As per the RBI circular issued on 10 August 2012, this facility is to be offered to “all eligible customers”, instead of saying all customers enjoying cheque facility. RBI has not clarified as to who is an eligible customer, leaving it to the discretion of individual banks. With this loophole, the banks may be tempted to offer this service only to high net worth customers stipulating a much higher minimum balance in the account to be eligible for this facility, thereby defeating the very purpose of this service. Besides, this will give rise to two class of cheques, i.e. cheques which are payable at par at all the branches of a bank, and cheques which are payable only in a single city, where drawee bank’s branch is located. In order to serve the purpose of bringing about further efficiency in cheque clearing as stated by the RBI in its circular, and to extend this facility to all those enjoying cheque facility, RBI should issue a further clarification directing banks to make this facility available to all the customers who have been offered cheque facility by the banks. This may be an unintentional omission, which needs to be corrected.
 

Withdrawing cash from branches other than the home branch

 

The aforesaid circular of RBI covers only payment of cheques through the clearing house and does not include cash payments. Recently a customer of a nationalized bank having an account in Borivili, Mumbai branch of a bank wanted to urgently handover cash to the tune of Rs50,000 to his relation living in Matunga. Even though this bank is under CBS, he was informed that the facility of drawing cash from another branch of the same bank was not available to him. Hence he was compelled to withdraw cash at Borivili and travel all the way to Matunga with the attendant risk involved in carrying cash, which could have been avoided, if only the facility of payable at par at any branch of the bank was available even for cash transactions. This facility is useful when you travel to other cities also, as withdrawal from ATMs is permitted with lot of restrictions attached to it. A few banks do allow withdrawal of cash from another branch of the same bank in a limited way, but there is neither uniformity nor clarity in this regard. As the circular issued by the RBI last week is silent in this matter, it is desirable that suitable guidelines may be issued in the interest of customer safety and convenience.

 

Depositing cash/cheques in branches other than the home branch
 

A customer of a bank in Delhi wanted to make a remittance to his son studying in Mumbai. He has many options to send this remittance, one of which is to simply credit the amount to his son’s account with the bank in Delhi, whose Mumbai branch is having his son’s account.  So he went to the nearest branch of that bank in Delhi and asked the counter clerk whether he could deposit cash for credit of his son’s account in Mumbai in the same bank, as both the branches were under CBS. He was informed that he could do so only if he was also the account holder of that bank in Delhi. Otherwise the beneficiary of the remittance would have to pay a hefty charge for receiving such a remittance. As he did not have an account with that bank in Delhi, he was asked to remit the amount through National Electronic Funds Transfer mode (NEFT), which was a cheaper mode of remittance, but the amount would be available to his son only on the next working day. If only the bank had extended the CBS benefit to the father of the account holder of the bank in another city, life would have been much simpler and the customer would have received the remittance quickly and without any hassle and cost. This is a classic case of simple things made complicated for want of understanding the customer’s needs.

 

Updating the passbook in a branch other than the home branch
 

A pensioner, receiving his pension though his account with a public sector bank in Mumbai went on a long holiday to stay with his daughter in Chennai. He was very happy to see a branch of his bank nearby and went to the branch in the first week of the month to get his pass book written up just to make sure that his pension for the previous month has been duly credited to his account. He no doubt got his pass book written up, but was surprised to find a charge of Rs10 debited to his account for extending this service. He was informed that this charge was as per the rules of the bank, though, no such charge was levied for extending the same service in his home branch. The amount of charge may be small for the bank, but not for a pensioner. Is this not a case of taking advantage of customer’s predicament?
 

There are a number of other services like renewing or encashing a fixed deposit, payment of loan instalments, even closing an account, etc which are possible under CBS in any branch of the bank, without incurring any additional cost to the bank. By extending all these services in any branch of the bank without any extra charge, banks can win over the customers and continue to enjoy their patronage, which will help them to expand their current and saving deposits, a source of low cost deposits for the banks. These may appear small pinpricks, but they certainly go a long way in making life simpler for a large number of our people who do not have access or knowledge of internet and computers. But unfortunately, many public sector banks in our country are either slow in providing innovative services to the customers or do not bother to find out the customer’s needs. They only act on getting a direction from the RBI, which alone with a little foresight can make the life of bank customers a little more comfortable and convenient in these trying times.
 

 (The author is a banking analyst. He writes for Money Life under the pen-name ‘Gurpur’.)

Comments
JIGNESH MANANI
10 years ago
As per Core Banking Solution (CBS), Customers are enables to operate their accounts, and avail banking services from any branch of the Bank on CBS network, regardless of where he maintains his account.

My account is at BOB – Amreli and presently I am living in surat so that I had deposited 1 cheque of transfer (BOB to BOB) in Bank of Baroda – Nanpura (Surat) branch.

It is informed to me that transfer cheques can be deposited either at issuer’s branch or in receiver’s branch. And bank staff denied to accept this cheque so that I had meet bank manager for this but he also answering same. I ask for reason why it is not accepted then he tells that this is as per bank’s rules. I ask to manager to give this statement in writing that transfer cheques can not be accepted for this reason and also ask to see me rules of bank for this but he denied to give and tells that “do whatever you can do, i will not accept this cheque”.

There is no meaning of CBS in this type of banking facilities.

Due to this type of wrong banking many customers are suffering a lot. This is done with me so many times so i had explore this issue at RBI level also.

I think this is due to there is no benefit to that branch for accepting transfer cheques of other branches.
JIGNESH MANANI
10 years ago
As per Core Banking Solution (CBS), Customers are enables to operate their accounts, and avail banking services from any branch of the Bank on CBS network, regardless of where he maintains his account.

My account is at BOB – Amreli and presently I am living in surat so that I had deposited 1 cheque of transfer (BOB to BOB) in Bank of Baroda – Nanpura (Surat) branch.

It is informed to me that transfer cheques can be deposited either at issuer’s branch or in receiver’s branch. And bank staff denied to accept this cheque so that I had meet bank manager for this but he also answering same. I ask for reason why it is not accepted then he tells that this is as per bank’s rules. I ask to manager to give this statement in writing that transfer cheques can not be accepted for this reason and also ask to see me rules of bank for this but he denied to give and tells that “do whatever you can do, i will not accept this cheque”.

There is no meaning of CBS in this type of banking facilities.

Due to this type of wrong banking many customers are suffering a lot. This is done with me so many times so i had explore this issue to the RBI level also.

I think this is due to there is no benefit to that branch for accepting transfer cheques of other branches.
MK Gupta
1 decade ago
With ref to the opening statement that, “Almost all the banks in our country have introduced “core banking solutions” (CBS), under which, all the branches of each bank are centrally inter-connected”, it must be categorically noted that, as far as the SBI is concerned, this service is payable only at a price AND IS NOT FREE.
nagesh kini
1 decade ago
The RBI certainly comes with some directions in spurts and jerks that are not just half baked but more half hearted.
The suggestions made by Gurpur are absolutely valid, coming ads they do from a veteran banker with international and equally vast domestic exposures.
There is no logic in levying any charges either for updating pass book at another branch of the same bank or withdrawing cash from another bank ATM.
All banks face long Qs for collecting cash and cheques for utility bill payments. None of them or the utilities seem to be keen on motivating them to opt for ECS. The banks can cut down on paper, entries postings, issuing of receipts and no persons in a crowded branch. The utilities in turn will benefit by instant collections that go to reduce their receivables in a jiffy!
Banks also complain that NEFT is a tedious exercise for them.
If only RBI could be more sensitive to the ground realities!
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