CLEARING HOUSE OPERATION

WHAT IS THE OBJECTIVE OF CLEARING HOUSE

Speedy

& economic collection of cheques & other instruments

at the member /sub-member bank branches located at the same centre.

Payable

INSTRUMENTS SETTLED THROUGH CLEARING HOUSE

Cheques Drafts Pay Order Warrants ECS Debit /Credits Income Tax Refund Orders Government Payment Order

INWARD CLEARING

Here, cheques issued by A Banks customers to the customers of other banks are honoured. These cheques are drawn on the A Bank and A Banks customers accounts are get debited

OUTWARD CLEARING

In Outward Clearing, cheques deposited by A Banks customers are collected. The cheques are drawn on a Bank other than A Bank and A Banks customers accounts are get credited once the cheques are honoured by the other banks.

DIFFERENT TYPES OF CLEARING

High value clearing

Normal clearing National clearing Return clearing Speed Clearing

HOW DOES CLEARING HOUSE START FUNCTIONING

To institutionalize the arrangement and to facilitate orderly conduct of business, a formal structure is put in place with RBI/SBI/OTHER BANKS managing the clearing
A Bank (Settlement Bank) is appointed to oversee clearing operations

Account with the bank managing clearing

HOW DOES CLEARING HOUSE START FUNCTIONING In 4 Metros and some major cities, RBI manages the clearing house (CH). SBI & other PSBs also mange CHs. The manager of the bank which manages the clearing house is the President of CH. There are 1076 Clearing Houses. They are guided by Uniform Regulations & Rules for Bankers Clearing House ( URRBCH) RBI has framed these rules to make arrangements for speedy and efficient collection of instruments

ORGANISATION OF CLEARING HOUSE

The manager of the bank which manages the clearing will be the President of CH. The President is assisted by a Standing Committee. Committee shall - have not less than 5 and not more than 7 members. - resolve any problems / issues / situations in day to day functioning. Members & Sub-members / membership criteria.

PROCEDURE FOR PRESENTATION IN CLEARING

Sort cheques/drafts drawn on local bank branches Ensure all are specially crossed

Affix the clearing seal (clearing stamp) List Bank wise - Forwarding Schedule
Then send to service branch/main branch/RPC where consolidation is made bank wise. Instruments on sub-member listed separately. a

CLEARING HOUSE OPERATION

At the Clearing House ,instruments are distributed to the respective banks.

Similarly other participants will deliver the instruments drawn on this bank
presentations and claims are netted bank-wise

Arrive at the receivable and payable in respect of each bank Total of receivables and payables of all the participating banks should tally.

Net of receivables and payables will show whether on that day the bank has made more presentation on other banks or vice versa (favourable/adverse).

CLEARING HOUSE OPERATION

A signed copy of the settlements sheet is handed over to the supervisor. Gross balance is struck by the supervisor CH will debit /credit the net amount payable/ receivable by each bank. In case of shortfall, the member shall arrange to meet the shortfall. Generally overdraft arrangement with the clearing house against government securities exists In case of surplus remittance to the members treasury branch.

CLEARING HOUSE OPERATION

There may be 1 or 2 deliveries in a day. The instruments are taken to the branches for payment through service branch.

After scrutiny at branches, the instruments are debited to the respective accounts In case of deficiency, some of the instruments may have to be returned.

CLEARING GENERAL CONDITION

Timings - followed strictly RBI guidelines - local cheques - credit on the 3rd day. - cheque should be presented in the clearing on the same day( 1st day). - 2nd day afternoon paid or returned - 3rd day proceeds available for drawing.

CLEARING GENERAL CONDITION

Relaxations

One additional day is available if: participating in clearing through Service Br. participating as a sub-member.
branch is a morning/ evening branch.

CLEARING GENERAL CONDITION

HOW THE TIME NORMS ARE ACHIEVED Sorting for local or outstation clearing Bank wise sorting if 2 branches are participating in clearing, they are listed separately. Credit pay-in-slips and cheques tallied Usage of Encoders & reader-sorter has made the tallying process easier. Normally cut-off time will be 1 hour earlier to the time of clearing.

CLEARING GENERAL CONDITION

If it fails to return, bank has to absorb the loss - payment of stopped instruments - forged instruments - altered instruments. Wrong return, bank is liable to the drawer Errors may creep in despite best efforts: - cheque is listed, but not available - cheque is available, but not listed Banks mutually co-operate to reconcile the entries.

CLEARING TIME NORMS

In cases where they meet for exchange, there is an agreed time for exchange of instruments for return of unpaid instruments The time norms means instruments received should be scrutinised , paid or returned within the time specified

COUNTER RETURN
If for some reason you are unable to return a cheque within the time for return, what do you do?
In such cases ,instead of returning the cheque in outward clearing, it is returned directly to the presenting bank. Such a return across the counter is known as Counter Return. A pay order is taken from the bank concerned for the amount of the cheque. This pay order is presented along with other cheques in the next outward clearing

CLEARING HOUSE RULES

Each member bank to be represented by its authorized official. An official of a service branch represents the member bank in CH. ID card & entry card of CH.

Adherence to timings consequences of late arrival of the representative .

Representative shall be changed frequently.

Member banks are responsible for the actions of their representatives.

CLEARING HOUSE RULES

Representative should attend during Clearing hours.

The rep shall be abide by rules of CH.

Rep to leave the CH with the permission of the supervisor after the final balance is struck. Clearing register entry of documents received / delivered.

Net amount due to or payable by his bank is arrived at