The central bank, RBI has issued a directive asking the banks to ensure that the local cheques clearance is done within the same day or at most by the next day of presentation.
Banks have also been asked to report the compliance to the set norms within a month. Besides this, banks must prominently display the cheque collection policy (CCP) on their official websites.
The regulator also cautioned the banks about non-adherence, which would mean payment of the penal interest amount. The penal interest must be clearly stated in the CCP documents; else, it would be the same as the interest rates on the fixed deposits of an equivalent maturity period. The circular also specified, "The timeframe for collection specified by the Commission (NCDRC) shall be treated as the outer limit and credit shall be afforded if the process gets completed earlier."
Earlier, RBI had liberalized the banks to frame their own cheque-clearing policies. The present move follows an order issued by the National Consumer Disputes Redressal Commission (NCDRC) under the Consumer Protection Act 1986. As stated in the order, "The need for passing the interest benefits to payees on their cheque proceeds once the payee's bank (and not payee's account) receives credit from the drawee bank is of significant consequence. No passing of such interest benefits to the customers...leads to undue enrichment of banks at the cost of their customers."
It was noted by NCDRC that banks had a float of 4-6 days on the local cheques. For outstation cheques the banks took as many as 11-16 days for clearance.
The commission further reasoned ‘nearly 1.3 billion cheques are cleared annually, involving over Rs.1,13,37,000 crore. Even if you assume that banks are not enjoying a free float for half the cheques, it still means the banking sector enriches itself (at the cost of its customers) to the tune of at least Rs 56,68,500 crore in a year.'