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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that have been undertaken by a number of banks, the Reserve Bank of India had, with effect from 1st November 2004, withdrawn its earlier instructions to commercial banks on (i) Immediate Credit of local/outstation cheques, (ii) Time Frame for Collection of Local / Outstation Instruments and (iii) 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:
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Collection of cheques and other instruments payable locally, at centres within India and abroad.
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Our commitment regarding time norms for collection of instruments.
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Policy on payment of interest in cases where the bank fails to meet time norms for realization of proceeds of outstation instruments.
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Our policy on dealing with collection instruments lost in transit.
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Our Policy on dishonour of cheques
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. To avoid fraudulent transactions by intercepting the cheque, customers should ensure that the cheques deposited in collection boxes are specially crossed to Union Bank of India. Instructions to this effect are displayed on the Cheque Collection Box. As a policy, bank would give credit to the customer account on the same day clearing settlement takes place. Withdrawal of amounts so credited would be permitted on Day-2 or Day-3 as per the cheque return schedule of the clearinghouse. Wherever the branch has the facility of high-value clearing (same day credit) the same will be extended to customers.
In case of cheques deposited in all loans and advances accounts including term loan value date credit will be given on Day-1 or Day-2 as the case may be (that is the day on which settlement account of the Bank with RBI/SBI is credited depending on clearing cycle at the place) for limited purpose of calculation of products for application of interest in all loan and advances accounts including term loan.
Subject to immediate credit facility afforded as per para 2.4 of the Cheque Collection Policy, any withdrawal on or before Day-2 or Day-3 shall be treated as withdrawal against effects and applicable interest shall be charged for the said intervening days between withdrawal and actual credit to the account.
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.
2.2. Outstation Cheques
a) 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 centres 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 centralized, processing arrangement and are offering anywhere banking services to their customers will provide same day credit to their customers in respect of outstation instruments drawn on any of our branches in the CBS network.
b) Speed Clearing
Collection of outstation cheques, till now, required movement of cheques from the presentation centre (city where the cheque is presented) to Drawee Centre (city where the cheque is payable) which increases the realization time for cheques. Speed clearing aims to reduce the time taken for realization of out station cheques. Outstation cheque collection through collection basis takes around one to two weeks time depending on the drawee centre. Under Speed Clearing, it would be realized on T+1 basis viz., within 48 hours.
Speed Clearing refers to collection of outstation cheques through the local clearing. It facilitates collection of cheques drawn on outstation core banking enabled branches of banks, if they have a net worked branch locally.
Bank is participating in Speed Clearing introduced by Reserve Bank of India. The facility is presently extended at 66 MICR CPC locations. With Speed Clearing any outstation cheuqes and other instruments (except demand drafts, pay orders) drawn on CBS enabled branches of member banks are presented in local clearing at MICR centres.
2.3 Cheques payable in Foreign Countries
The Bank handles the transactions relating to foreign cheques for collection of their customers. Such cheques may be for personal purposes or trade related purposes.
Foreign cheques will be sent for collection to the respective centers where it is payable through our correspondent banks for collection. The realization depends upon the local clearing rules, which vary from country to country and centre to centre.
The applicable exchange rate for conversion of the foreign currency amount of the cheque shall be the one prevailing as on the date of conversion of foreign currency amount into Indian Rupees. The advice will clearly mention the rate at which it is converted.
2.4 Immediate Credit of Local / Outstation Cheques / Instruments:
Branches / extension counters of the bank will provide immediate credit for outstation cheques / instruments up to the aggregate value of Rs.15,000/- tendered for collection by individual account holders subject to satisfactory conduct of such accounts for a period not less than 6 months. In case of prepaid instruments like DDs, Interest/ Dividend Warrants drawn on our bank/branches and cheques issued by government undertakings the maximum limit will be Rs.25,000/-.
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.
Higher limits will be given for immediate credit of cheques in the form of bundled products upto Rs.25,000/- in all satisfactorily operated Multi Gain Savings Accounts (MGSA) as the customers maintain minimum balance of Rs.25,000/- in these accounts.
The facility of immediate credit would also be made available in respect of local cheques at centres where no formal clearing house exists.
Under this policy, immediate credit will also be given only in respect of prepaid instruments like Demand Drafts, Interest / Dividend warrants drawn on our bank/branches.
Branches will not wait for any formal request from a customer in this regard and afford immediate credit to the accountholder subject to satisfying the following eligibility criteria:
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The account should be properly introduced and opened at least six months prior to the date of credit and complying with KYC norms.
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Conduct of the account has been satisfactory and bank has not noticed any irregular dealings.
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There have been no instances to return cheques / instruments drawn by the customer unpaid for want of adequate balance in the account.
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The total amount of all such cheques credited to the account, but not yet realized and the amount of cheque no to be credited, does not exceed the maximum limit prescribed for immediate credit. In other words, total exposure of the bank in respect of such unrealized cheques credited to the account, does not exceed the maximum limit of Rs.15,000/- or Rs.25,000/- (in case of prepaid instruments like DDs, Interest/ Dividend Warrants drawn on our bank/branches and cheques issued by government undertakings) at any point of time or the limits prescribed for MGSA.
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The bank has not experienced any difficulty in recovery of any amount advanced in the past including cheques returned after giving immediate credit.
In case of outstation cheques, Bank shall levy normal collection charges and out of pocket expenses while providing immediate credit against outstation instruments tendered for collection. A charge of Rs.5/- shall be recovered for local cheques. Interest/exchange charges applicable for cheque purchase will not be charged.
In the event of dishonor of cheque 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 clean overdraft limits sanctioned for individual customers subject to the following provisions:
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No interest shall be charged to the customer for the period between the date of credit of cheque lodged and its return provided bank has not remained out of funds.
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Interest at the rate applicable to clean overdraft from the date the Bank was out of funds till the date of reimbursement of money to the bank.
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Where the cheque is credited to a Savings Bank Account, no interest will be payable by the bank on the amount so credited if the cheque is returned unpaid.
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On debiting the account for return of cheque, if balance in the account goes down below the minimum prescribed, penalty for non-maintenance of minimum balance will be levied.
Special pay-in-slip has been introduced for this facility wherein a notice is superimposed to the effect that in the event of dishonour of cheque, the customer will have to pay interest for the period the bank is out of funds at the applicable rate.
A notice regarding the availability of the facility shall be prominently displayed in the branch premises.
2.5 Purchase of local/outstation cheques
Bank may, at its sole 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 and this will be subject to levy of service charges.
3. Time Frame for Collection of Local / Outstation Cheques / Instruments:
3.1 Collection of Local Cheques/Instruments
For local cheques presented in clearing credit will be afforded as on the date of settlement of funds in clearing and the account holder will be allowed to withdraw funds as per return clearing norms in vogue. Cut-off time upto which the cheques received will be sent for clearing the same day, time when customer’s account gets credited and when customer can utilize the funds will be displayed in the branches. Similarly cut-off time prescribed for each cheque collection box will be indicated on the box. Cut-off time for receipt of cheques for payment to government accounts like Income Tax etc. will be displayed in the branches transaction government business.
3.2 Collection of Outstation Cheques/Instruments
i) For cheques and other instruments sent for collection to centres within the country the following time norms shall be applied:
i. Another centre where we have a branch – Maximum T+6 days
ii. Centres where we do not have a branch – Maximum T+10 days
ii) Cheques drawn on foreign countries: Foreign cheques are sent for collection to the respective centers where they are payable through our correspondent banks for collection. The realization depends upon the local clearing rules, which vary from country to country and centre to centre. Normally USD cheques are returned within 15 days of presentation, except those cheques, which are fraudulent. Cheques which are fraudulent on the face can be returned within one year and other any time. Bank will, however give proceeds of realization within 20 days in case of USD cheques drawn in USA, subject to the right to debit in case of fraudulent cheques. All other foreign currency cheques are paid within two working days from the date of receipt of statement of Nostro Account showing the credit.
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 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:
e.g. If a cheque payable at Chennai is deposited at Mumbai on 1st January 2007 and credited to the customer’s account on 11th January 2007, the actual period of delay will be 3 days. Interest will be payable for the period of 3 days at the rate of interest applicable for equivalent period of deposit. Since the actual number of days is less than 7 days, the applicable rate of interest will be the corresponding rate of interest for minimum tenure of term deposit i.e. 7 – 14 days.
e.g. If a cheque payable at Chennai is deposited at Mumbai on 1st January 2007 and credited to the customer’s account on 11th February 2007, the actual period of delay will be 34 days consisting of 30 days normal delay and 4 days abnormal delay. Interest will be payable for the period of 30 days at the rate of interest applicable for equivalent period of deposit and for the period of 4 days at 2% over and above the interest applicable for delay. The applicable rate of interest will be the corresponding rate of interest for the period of 34 days.
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In the event the proceeds of cheque under collection were 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 accountholder can inform the drawer to record stop payment and also take care that 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 Bank’s Compensation Policy the accountholder will be compensated in respect of instruments lost in transit in the following way:
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Expenses incurred for obtaining duplicate instrument will be paid @2% of the amount of instrument subject to maximum of Rs.500/-
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In addition, bank will pay interest on the amount of the cheque for a maximum period of 30 days at the rate applicable for relevant period of fixed deposit prevailing at the time of payment of interest to provide for likely further delay in obtaining duplicate cheque/instrument and collection thereof.
In case of cheque/instrument lost after it is discounted bank would not charge interest for the period beyond the normal collection period.
6. 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 were not withdrawn, the amount so credited will not qualify for payment of interest when the cheque is returned unpaid. If proceeds 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.
7. 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 or 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 within the specified service delivery parameters.
8. Dealing with frequent dishonor of cheques
Ensuring improvement in the customer service rendered by the banks has been the constant endeavour of RBI. Meeting the legitimate aspirations of its customers will enable the bank to maintain its image, create confidence and attract funds comparatively at low cost in a competitive environment. RBI had set up in 1990 a Committee headed by Shri M.N.Goiporia, the then Chairman of SBI.
The committee had made various recommendations to ensure improvement in the customer service not only in primary urban cooperative banks but also in all the banks. In addition, RBI has also issued various guidelines on many issues. The Goiporia Committee has recommended for implementation of 15 aspects of customer service and these are called 15 Core Recommendations of the Goiporia Committee on Customer Service.
Of the 15 core recommendations, Recommendation No.3.36 deals about the dishonoured instruments. The recommendation states as follows:
Apart from this, Joint Parliamentary Committee (the JPC) which investigated into the Stock Market Scam, had recommended that ‘specific guidelines need to be issued by the RBI to all banks regarding the procedure to be followed by them in respect of dishonoured cheques from Stock Exchanges.
In the light of aforesaid recommendations of the JPC, the extant instructions relating to return of all dishonoured cheques have been reviewed. Hence, this policy for dealing with frequent dishonor of cheques.
9 Procedure for return / dispatch of dishonoured cheques
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Branches will return dishonoured cheques presented through clearing houses strictly as per the return discipline prescribed for respective clearing house in terms of Uniform Regulations and Rules for Bankers’ Clearing Houses.
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In relation to cheques presented direct to the branches for settlement of transaction by way of transfer between two accounts with that branch, it will return such dishonoured cheques to payees / holders immediately.
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Cheques dishonoured for want of funds in respect of all accounts will be returned along with a memo indicating therein the reason for dishonor as “insufficient funds”.
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In any case, the dishonoured instrument will be returned/despatched to the customer promptly without delay on the same day but within 24 hours.
10. Information on Dishonoured Cheques
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Data in respect of each dishonoured cheque for amount of Rs.1 crore and above will be made part of Bank’s MIS on constituents and concerned branches will report such data to their respective Regional Offices on a monthly basis and in turn Regional Offices will consolidate and submit the same to Central Office
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Data in respect of cheques drawn in favour of stock exchanges and dishonoured will be consolidated separately by branches irrespective of the value of such cheques as a part of their MIS relating to broker entities, and be reported to the respective Regional Offices on a monthly basis. The Regional Offices will consolidate and submit this information to Central Office every month.
11. Dealing with incidence of frequent dishonour:
11.1 Dealing with frequent dishonor of cheques of Rs.1 crore and above
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With a view to enforce financial discipline among the customers, bank has decided to introduce a condition for operation of accounts with cheque facility that in the event of dishonor of a cheque valuing rupees one crore and above drawn on a particular account of the drawer on four occasions during the financial year for want of sufficient funds in the account, no fresh cheque book would be issued. The bank may also consider closing current account at its discretion. However in respect of advances accounts such as Cash credit account, overdraft account, the need for continuance or otherwise of these credit facilities and the cheque facility relating to these accounts will be reviewed by appropriate authority higher than the sanctioning authority.
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For the purposes of introduction of the condition mentioned at (a) above in relation to operation of the existing accounts, bank may, at the time of issuing new cheque book, issue a letter advising the constituents of the new condition.
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If a cheque is dishonoured for a third time on a particular account of the drawer during the financial year, bank will issue a cautionary advice to the concerned constituent drawing his attention to aforesaid condition and consequential stoppage of cheque facility in the event of cheque being dishonoured on fourth occasion on the same account during the financial year. Similar cautionary advice will be issued if the bank intends to close the account.
11.2 Dealing with frequent dishonor of cheques of value of less than Rs.1 crore
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On the same lines mentioned above, with a view to enforce financial discipline among the customers, bank has decided to introduce a condition for operation of accounts with cheque facility that in the event of dishonor of a cheques of value of less than Rs.1 crore, drawn on a particular account of the drawer on four occasions during the financial year for want of sufficient funds in the account, no fresh cheque book would be issued. The bank may also consider closing current account at its discretion. However in respect of advances accounts such as Cash credit account, overdraft account, the need for continuance or otherwise of these credit facilities and the cheque facility relating to these accounts will be reviewed by appropriate authority higher than the sanctioning authority.
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For the purposes of introduction of the condition mentioned at (a) above in relation to operation of the existing accounts, bank may, at the time of issuing new cheque book, issue a letter advising the constituents of the new condition.
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If a cheque is dishonoured for a fourth time on a particular account of the drawer during the financial year, bank will issue a cautionary advice to the concerned constituent drawing his attention to aforesaid condition and consequential stoppage of cheque facility in the event of cheque being dishonoured on fifth occasion on the same account during the financial year. Similar cautionary advice will be issued if the bank intends to close the account.
12. General
For the purpose of adducing evidence to prove the fact of dishonor of cheque on behalf of a complainant (i.e., payee / holder of a dishonoured cheque ) in any proceeding relating to dishonoured cheque before a court, consumer forum or any other competent authority, bank will extend full co-operation, and will furnish him / her documentary proof of fact of dishonor of cheques.
Bank will place before Audit / Management Committee, every quarter, consolidated data in respect of the matters referred to at 10 above.
13. Dealing with frequent dishonor of ECS
The practice of issuance of ECS mandates without maintaining adequate funds undermines the credibility of such mandates and is an unhealthy trend that needs to be curbed. As such, Bank requests its customers to maintain adequate balance before allowing ECS debit mandate. If it is observed that practice of issuing ECS mandate persists in case of any customer, then such cases shall be dealt as under.
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In the same lines mentioned above, with a view to enforce financial discipline among the customers, bank has decided to introduce a condition for operation of accounts where customer is using ECS facility that in the event of dishonour of ECS instructions, drawn on a particular account of the drawer on three occasions during the financial year for want of sufficient funds in the account, the presenting bank must delete this ECS instruction from the list. The bank may also consider closing account at its discretion. However in respect of advances accounts such as Cash credit account, overdraft account, the need for continuance or otherwise of these credit facilities and the cheque facility relating to these accounts should be reviewed by appropriate authority higher than the sanctioning authority.
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For the purposes of introduction of the condition mentioned at (a) above in relation to operation of the existing accounts, bank may, at the time of accepting the ECS mandate, issue a letter advising the constituents of the new condition.
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If a ECS instruction is returned for second time on a particular account of the drawer during the financial year, bank will issue a cautionary advice to the concerned constituent drawing his attention to aforesaid condition and consequential closure of the account in the event of ECS instruction being dishonoured on third occasion on the same account during the financial year.
At the cost of repetition, it is reiterated that, all the cheques / ECS mandates, if they are to be returned for want of funds in the account, then they will be returned with the reason “insufficient funds in the account” only.
14. Bank retains the right to amend / modify the policy and display of the same on notice board of branches / on the web site would be deemed to be adequate notice to customers of the said change.
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