High value clearing, the facility that enables depositors to encash cheques drawn for over Rs 1 lakh the next day, is set to be phased out.
The Reserve Bank of India (RBI) has increased the minimum value for high value clearing to Rs 5 lakh from May. This will be increased further to Rs 10 lakh by August and will be withdrawn completely by November 2009. The central bank has said that electronic alternatives, such as national electronic fund transfer (NEFT) and real time gross settlement (RTGS), have reduced the need for cheque-based clearing.
High value clearing was introduced by RBI in response to request made by corporate customers to the banks to reduce the interest cost for the debit balances in their cash credit accounts, by introducing an efficient clearing system to be settled on T+0 basis. Cheques worth Rs 1 lakh and above, drawn on designated branches, were permitted to be presented in high value clearing. This facility was available only in metro centres and were restricted to a small geographical region around clearing centres.
However, unlike high value clearing, most banks have a charge for RTGS. RBI has said that in order to encourage migration to electronic mode, a cap for charges — viz. not exceeding Rs 5 per transaction for Rs 1 lakh and Rs 25 per transaction for above Rs 1 lakh — for transactions done through NEFT has been fixed. An amount not exceeding Rs 25 per transaction for Rs 1-5 lakh and Rs 50 per transaction for Rs 5 lakh and above for RTGS transactions has been introduced by RBI.
Most banks in Mumbai that participate in high value clearing are RTGS/NEFT enabled and payments can be effected more efficiently using RTGS and NEFT fund transfer mechanisms. As per RBI’s annual report, high value clearing worth Rs 55,00,018 crore took place during FY08.