Operational Aspects of Handling Clearing/Collection/Cash

Cheque Clearing

Clearing is the process of settling payments between banks for the cheques drawn by their customers on other banks. In the past, this involved the physical movement of cheques. Today, the process is almost entirely digital.

Cheque Truncation System (CTS)

  • What it is: CTS is the modern system for cheque clearing used in India. Truncation means stopping the physical movement of the cheque.
  • How it works:
    1. A customer deposits a cheque at their bank (the collecting bank).
    2. The collecting bank captures a digital image of the cheque and its relevant data.
    3. This digital image is transmitted electronically to a central clearing house and then to the drawee bank (the paying bank on which the cheque is drawn).
    4. The paying bank verifies the details (signature, balance, etc.) from the digital image and makes the payment.
  • Benefit: CTS makes the clearing process much faster, more secure, and more efficient.

Cheque Collection

This refers to the bank acting as an agent for the customer to collect the payment for a financial instrument.

  • Local Cheque Collection: When the cheque is drawn on another bank branch within the same city or clearing zone. This is handled quickly through CTS.
  • Outstation Cheque Collection: When the cheque is drawn on a bank branch in another city. While CTS has made this process much faster, it may still take slightly longer than local clearing.

Cash Handling

This involves the procedures for managing physical currency at the bank branch to ensure accuracy, security, and customer service.

Cash Payments (Withdrawals)

  • Verification: The teller must carefully verify the cheque or withdrawal slip. This includes checking the date, amount in words and figures, and, most importantly, the customer’s signature.
  • Passing Authority: For amounts above a certain limit, the transaction must be authorised by a bank officer before the cash is paid.
  • Cash Counting: Currency should be counted carefully, preferably using a counting machine, and then re-counted manually in front of the customer.

Cash Receipts (Deposits)

  • Verification: The teller must verify that the amount mentioned on the deposit slip matches the actual cash received.
  • Checking for Counterfeit Notes: Bank staff are trained to detect fake currency notes. Suspected notes are impounded and reported as per RBI guidelines.
  • Crediting the Account: After verification, the amount is immediately credited to the customer’s account, and a stamped receipt is given to the customer.

ATM Operations

  • Cash Replenishment: Ensuring ATMs are loaded with sufficient cash to meet customer demand.
  • Reconciliation: Tallying the cash disbursed by the ATM with the machine’s electronic records at the end of the day.
  • Security: Ensuring the physical security of the ATM and the safety of customers using it.