Has CTS Cheque Clearance made Indian Banking Moved Ahead or Behind? Is this a planned strategy to make use of non paper based transaction by banks?
Right Stock at Right Price for Right Time
Have you ever invested in a stock on someone's advice to make profit and then has to wait for months, maybe years, to recover capital? Not anymore.
I don’t receive many cheques these days but but property deals always has those high value cheque and pay orders to be dealt with. I sold a flat in recently and so I deposited the pay order into the bank account. I knew for sure that high value clearance does not work anymore.
So what was high value clearance?
For those who are not aware of about high value clearance. Every bank had one early morning clearance for high value cheques. Any cheque above 1 lakh was considered as high value, then it was increased to 2 lakh and then at 10 lakh. So if you had a high value check for clearance, they were sent for clearance the same day and you will get the funds the same day in the evening.
So if you deposited the cheque before 10AM in morning (Assuming high value clearance time for your bank and branch is 10AM), your check will be sent for clearance on the same day and in the evening, your get the cleared fund into your account.
What is CTS or Cheque truncation system?
Cheque Truncation System (CTS) in India is for faster clearing of cheques where cheque data are captured at the collecting bank branch and transmitted electronically to the drawee branch without the need for the physical cheques to move from the collecting bank to the drawee bank.
If you want know more details about CTS, you can read about it on Wikipedia.
Clearly CTS technology is for faster clearance of cheque but did it actually made things faster or made it lot more slower?
The purchaser of my property had taken a bank loan and so the final draft from the bank will be handed over to me on the day the property is registered into the their name. So it was handed over to me on Friday 30th January 2015 at around 12PM. I headed towards the bank and deposited the check the same day.
The cheque went for clearance on 31st Jan 2015 i.e. on Saturday and fund was made available to me on Monday 2nd Feb 2015 at around 9PM. I know it was 9PM because I kept a keen eye on my bank account using netbanking almost hourly despite being sure bank drafts could never return back. You are always edgy when the amount is above 39 lakh.
What would have been the timeline under high value clearance being available?
In older days there were multiple clearance from the branches and last clearance would have been around 3PM i.e. near the closing hours of banking operations for the branch.
So I could have opted for normal clearance on Friday or high value clearance on Saturday.
- If I opt for normal clearance on Friday, the check would go for normal second clearance on Friday and fund would have been available to me on Saturday evening.
- If I opt for high value clearance, the check would go for high value clearance on Saturday morning and the fund would have been made available to me by Saturday evening.
In either case I would have had funds in my account by Saturday evening.
But with CTS clearance, bank branches now only have opted for 1 clearance per day and each branch clearance is at specific time. At least thats the case for HDFC Bank branches. I could have deposited the cheque in some other branch or main branch where the clearance time is late or close to 3PM and in that case I would have got the funds by Saturday evening but not otherwise.
In normal case, the cheque was sent for clearance on 31st Jan 2015 i.e. on Saturday and fund was made available to me on 2nd Feb 2015 at around 9PM at night. I kept an eye on my bank account using netbanking all the time though I was sure that draft could never return back but then you are always edgy when the amount is over 39 lac.
Whats your view?
We may now have RTGS and IMPS for instant payment from one bank to other and NEFT also gets credited the same day but have we moved ahead with cheque and demand drafts or we have moved behind? You can also read about How Many Days To Clear Local / At Par Cheque? or can share your views in comments below.