Last Updated on 11/04/2017

Policy on collection of cheques/instruments

1. Introduction:

Keeping in view the technological progress in payment  and settlement systems and the qualitative changes in operational systems and processes that have been undertaken  by a number of Banks, the Reserve Bank of India had, with effect from 1st November 2004 withdrawn its earlier instructions to commercial banks on (1) Immediate Credit of Local/Outstation instruments , (2) Time Frame for collection of Local/Outstation Instruments, and (3) Interest payment for delayed  collection. The withdrawal of these mandatory guidelines was expected to enable market forces of competition to come into play to improve efficiencies in collection of cheques and other instruments.   This collection policy of the Bank is a reflection of our on-going efforts to provide better service to our customers and set higher standards for performance.  The policy is based on principles of transparency and fairness in the treatment of customers.  The bank is committed to increased use of technology to provide quick collection services to its customers. This policy document covers the following aspects: 
- Collection of cheques and other instruments payable locally, at centres within India and abroad
- Our commitment regarding time norms for collection of instruments
- Policy on payment of interest in cases where the Bank fails to meet time norms for realisation of proceeds of outstation instruments
- Our policy on dealing with collection instruments lost in transit
2. Arrangements for collection :
2.1 Local Cheques
All cheques and other Negotiable Instruments payable locally would be presented through the clearing system prevailing at the centre.  Cheques deposited at branch counters and in collection boxes within the branch premises before the specified cut-off time will be presented for clearing on the same day.  Cheques deposited after the cut-off time and in collection boxes outside the branch premises including off-site ATMs will be presented in the next clearing cycle.  As a policy bank would give credit to the customer’s account on the same day clearing settlement takes place. Withdrawal of amounts as credited would be permitted as per the Cheque return schedule of the clearinghouse.
Bank branches situated at centres where no clearing house exists, would present local cheques on drawee banks across the counter and it would be the bank’s endeavour to credit the proceeds at the earliest.   
All branches will fix up the day’s cut off time for the inclusion of instruments for clearing, taking into account the clearing cycle  and other related factors, like distance from clearing house, communication facility, local established practices, methodology being followed by other banks in the particular centre etc.  While arriving at the said cut off time, care would be taken to extend maximum leverage time to the advantage of the customers.
Display board will be placed in the banking hall , indicating the cut off time limits for receipt of cheques for payment to Government Accounts like income-tax etc.
2.2 Outstation Cheques:
Cheques drawn on other banks at outstation centres will normally be collected through Bank’s branches at those centres.   Where the bank does not have a branch of its own, the instrument would be directly sent for collection to the drawee bank or collected through a correspondent bank.  The bank would also use the National Clearing Services offered by the Reserve Bank of India at centre where such collection services exist.  
Cheques drawn on bank’s own branches at outstation centres will be collected using the inter-branch arrangements in vogue.  Branches which are connected through a centralised processing arrangement and are offering anywhere banking services to its customers will provide same day credit to its customer in respect of outstation instruments drawn on any of its branches in the CBS network.
2.3. Cheques payable in foreign countries
Cheques payable at foreign centres where the bank has branch operations (or banking operations through a subsidiary, etc) will be collected through that office.   The services of correspondent banks will be utilized in country/centre, where the correspondent has presence.  Cheques drawn on foreign banks at centres where the bank or its correspondents do not have direct presence will be sent direct to the drawee bank with instructions to credit proceeds to the respective Nostro account of the bank maintained with one of the correspondent banks. 
The day when the amount is due for credit is the date of credit to Nostro Account plus 15 days for USD cheques and date of credit to Nostro Account plus 21 days in case of other currencies subject to other conditions as applicable in respective countries.
The exchange rate  will be the rate applicable on the date on which the foreign currency is converted in Indian Rupees and credited to the Customer’s account  by the Bank.

2.4.Immediate credit of local/outstation cheques/instruments:

Branches/Extension counters of the Bank will consider providing immediate credit to outstation  instruments which include Demand drafts drawn on other Banks, Interest Warrants and Dividend Warrants upto the aggregate value of Rs.15000/- tendered for collection by individual account holders subject to satisfactory conduct of such accounts for a period not less than 6 months. Immediate credit will be provided against such collection instruments at the specific request of the customer or as per prior arrangement.  The facility of immediate credit would also be made available in respect of local cheques at centres where no formal clearing house exists.   

The facility of immediate credit will be offered on savings Bank/Current/Cash Credit Accounts of the customers.  For extending this facility there will not be any separate stipulation of minimum balance in the account.  

Under this policy, prepaid instruments like demand drafts, interest/dividend warrants shall be treated on par with cheques.  

In the event of dishonour of cheques against which immediate credit was provided, interest shall be recoverable from the customer for the period the bank remained out of funds at the rate applicable for overdraft limits sanctioned for individual customers.  

For the purpose this policy, a satisfactorily conducted account shall be the one

a) Opened at least six months earlier and complying KYC norms

b) Conduct of which has been satisfactory and bank has not noticed any irregular dealings.
c) Where no cheques/instruments for which immediate credit was afforded returned unpaid for financial reasons.    

d) Where the bank has not experienced any difficulty in recovery of any amount advanced in the past including cheques returned after giving immediate credit.

Bank shall levy normal collection charges and out of pocket expenses while providing immediate credit against outstation instruments tendered for collection.   Exchange charges applicable for cheque purchase will not however be charged
2.5.Purchase of local and outstation cheques:
Bank may, at its discretion, purchase local/outstation cheque tendered for collection at the specific request of the customer or as per prior arrangement.   Besides satisfactory conduct of account, the standing of the drawer of the cheque will also be a factor considered while purchasing the cheque.   

2.6. Speed Clearing System.
Through speed clearing system, customers can present the cheques drawn on other Bank’s CBS Branch through Local Clearing. They can  get the clearance effected within the time frame applicable for local banks. This facility is available at  selected Centres only. Applicable service charges for speed clearing will be collected  from the customers.
2.7. Cheque Truncation System (CTS):
In order to utilize the technological innovations in banking services “ Cheque Truncation System”(CTS) is introduced in certain centres in which physical exchange of cheques to drawee bank in clearing will be dispensed with and instead, the images of the cheques will viewed and acted upon by the drawee bank branches, for payment or return as warranted. It will be introduced to other centres in a phased manner.
3.Time frame for collection of Local/ Outstation cheques / Instruments: 

In case of local cheques  presented for clearing, the bank shall permit usage of the shadow credit afforded to the customers’ account immediately after closure of relative return clearing and   withdrawal  shall be allowed on the same day or maximum within an hour of the commencement of business on the next working day subject to usual  safeguards.

Cheques/Instruments presented in high value clearing ( with the minimum value of Rs 1 lac) shall be credited on the same day ( applicable only in areas covered by high value/same day clearing)
For cheques and other instruments sent for collection to centres within the country the following time norms shall be applied. 

a) Cheques presented at any of the four major Metro Centres ( New Delhi, Mumbai, Kolkata and Chennai) and payable at any of the other three centres: Maximum period of 7 days. 

b) Metro Centres and State Capitals (other than those of North Eastern States and Sikkim)  Maximum period of 10 days. 

c) In all other Centres:   Maximum period of 14 days.  

d) Cheques drawn on foreign countries:   Such instruments are accepted for collection on the “best of efforts” basis.  Bank may enter into specific  collection arrangement with its correspondent bank for speedy collection of such instrument.  Bank  would give credit to the party on credit of proceeds to the Bank’s Nostro Account with the correspondent bank after taking into account cooling periods as applicable to the countries concerned.  

The above time norms are applicable irrespective of whether cheques/instruments are drawn on the bank’s own branches or branches of other banks. 

4.Payment of interest for delayed collection of Local/ Outstation Cheques:

As part of the compensation policy of the bank, the bank will pay interest to its customer on the amount of collection instruments in case there is delay in giving credit beyond the time period mentioned above.  Such interest shall be paid without any demand from customers in all types of accounts.  There shall be no distinction between instruments drawn on the bank’s own branches or on other banks for the purpose of payment of interest on delayed collection. 

Interest for delayed collection shall be paid at the following rates:  

4.1.Local Cheques: 

In case of delay in realization of local cheques  beyond the time frame as stipulated in para 3, interest will be paid at savings bank rate for the corresponding period of  delay.
4.2.Outstation Cheques:

a)Savings Bank rate for the period of delay beyond 7/10/14 days as the case may be  in collection of outstation cheques.
b) Where the delay is beyond 14 days, interest will be paid at the rate applicable to for term deposits of the respective period. 

c) In the case of extraordinary delay, i.e delay exceeding 90 days , interest will be paid at the rate of 2% above the corresponding Term deposit rate. 

d) In the event of the proceeds of Cheque under collection was to be credited to an overdraft / loan account of the customer, interest will be paid at the rate applicable to the loan account.   For extraordinary delays, interest will be paid at the rate of 2% above the rate applicable to the loan account. 

It may be noted that interest payment as given above would be applicable only for instruments sent for collection within India. 

5.Cheques/Instruments lost in transit, in clearing process or at paying Bank’s Branch
In the event a Cheque or an instrument accepted for collection is lost in transit or in the clearing process or at the paying bank’s branch, the bank shall immediately on coming to know of the loss, bring the same to the notice of the accountholder so that the account holder can inform the drawer to record stop payment and also take care that the cheques, if any, issued by him/her are not dishonoured due to non-credit of the amount of the lost  cheques/instruments.   The bank  would provide all assistance to the customer to obtain a duplicate instrument from the drawer of the Cheque.  

In line with the compensation policy of the bank the bank will compensate the  account holder in respect  of instruments lost in transit in the following way: 

a)In case intimation regarding loss of instrument is conveyed to the customer beyond the time limit stipulated for collection (7/10/14 days as the case may be) interest will be paid for the period exceeding the stipulated collection period at the rates specified above. 

b) In addition, bank will pay interest on the amount of the Cheque for a further period of 15 days at Savings Bank rate to provide for likely further delay in obtaining duplicate Cheque/instrument and collection thereof.

c)The bank would also compensate the customer for any reasonable charges he/she incurs in getting duplicate Cheque/instrument upon production of receipt, in the event the instrument is to be obtained from a bank/institution who would charge a fee for issue of duplicate instrument.  

d)Bank will reimburse the related charges debited in the account of the drawer (of collection/clearing cheque deposited by the customer which is lost in transit) by the drawee bank branch.

e)Further, as a customer enhancement measure, branches shall keep a photocopy of the instrument to meet any eventuality arising out of instruments lost in transit.
In the cases of discounted cheques, which are lost in transit, Bank will deal with the same as given below: 

1.Bank  will seek the consent of the beneficiary-customer for debiting his/her account towards recovery of discounted value  of the cheque which is lost-in-transit and interest thereon

2. If the Customer’s consent is not forthcoming, Bank will not debit customer’s account towards recovery and instead will pursue the process of obtention of duplicate cheque by rendering necessary assistance/ support to the customer.  Discounted value of the cheque and the interest thereon will be collected from the customer.   If the customer or the drawer is not cooperating for getting the duplicate instrument, the Bank will give prior notice to the customer and debit the account of the customer for the value paid with interest.   In case the recovery is found to be difficult, necessary legal action will be initiated.

6.Force Majeure

The bank shall not be liable to compensate customers for delayed credit if some unforeseen event (including but not limited to civil commotion, sabotage, lockout, strike or other labour disturbances, accident, fires, natural disasters and other “Acts of God” war, damage to the Bank’s facilities or of its correspondent bank(s) absence of the usual means of communication or all types of transportation, etc beyond the control of the Bank prevents it from performing its obligations with the specified service delivery parameters.  

7.Charging of interest on cheques returned unpaid where instant credit was given 

If a cheque sent for collection for which immediate credit was provided by the bank is returned unpaid, the value of the cheque will be immediately debited to the account.  The customer will not be charged any interest from the date immediate credit was given to the date of return of the instrument unless the bank had remained out of funds on account of withdrawal of funds.  Interest where applicable would be charged on the notional overdrawn balances in the account had credit not been given initially.
If the proceeds of the Cheque were credited to the Savings Bank Account and was not withdrawn, the amount so credited will not qualify for payment of interest when the Cheque is returned unpaid.   If the proceeds of the Cheque were credited to an overdraft/loan account, interest shall be recovered at the rate of 2% above the interest rate applicable to the overdraft /loan from the date of credit to the date of reversal of the entry if the Cheque/instrument was returned unpaid to the extent the bank was out of funds.