The Reserve Bank of India (RBI) has decided to withdraw the facility of high value clearing from November 2009. It is a facility that allows the cheques of over Rs 1lakh to be encashed in one day.

The apex body is withdrawing the facility because there are other alternatives like national electronic fund transfer (NEFT) and real time gross settlement (RTGS) that have reduced the need for cheque-based clearing.

Meanwhile RBI has raised the minimum amount for high value clearing to Rs 5 lakh from the month of May and further to Rs 10 lakh by August. From November the facility will be completely withdrawn.

The facility was introduced by RBI at the request of corporates to introduce an efficient clearing system for reducing the interest cost on debit balances in their cash credit accounts. Therefore cheques amounting to Rs 1 lakh and above were sanctioned for high value clearing.

However the facility was introduced at metro centers and a small geographical region around clearing centers. The RBI report records high value clearing worth Rs 55,00,018 crore during the fiscal year 08.

The electronic mode of transfer that includes RTGS/NEFT costs a customer who uses it. RBI has fixed this charge at Rs 5 per transaction for Rs 1 lakh where as a charge of Rs 25 per transaction is levied for above Rs 1 lakh transfer done through NEFT. Further for a transaction between Rs 1and 5 lakh and those above Rs 5 lakh are charged an amount of Rs 25 and Rs 50 per transaction respectively. The move has been taken by the banking regulator to encourage migration to the electronic mode of transfer.

Mostly banks that facilitate high value clearing are RTGS/NEFT enabled and further the RTGS and NEFT fund transfer mechanisms would make the payment system more efficient.