CONSUMER PROTECTION - CLEARANCE OF LOCAL CHEQUES

[M.K. Gupta]

FYI   CONSUMER PROTECTION - CLEARANCE OF LOCAL CHEQUES   AS PER A RECENT AD OF THE MIN. OF CONSUMER AFFAIRS: PAYMENT OF THE LOCAL CHEQUE SHOULD BE MADE ON THE SAME DAY OR ON NEXT WORKING DAY AT THE MOST.   OUTSTATNION CHEQUES SHOULD BE CLEARED WITHIN 7/10/14 DAYS AS PER POLICY OF THE RESPECTIVE BANK. IN CASE OF DELAY, BANK SHOULD PAY INTEREST FOR THE DELAYED PERIOD.   m k gupta

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[sushil kumar]

Guptaji,
Very good information.We all have add value to it by ensuring compliance while banking.

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Date: Tue, 16 Sep 2008 19:29:01 +0530
From: mkgup...@yahoo.co.in
Subject: Dwarka Forum: CONSUMER PROTECTION - CLEARANCE OF LOCAL CHEQUES
To: dwarka-r...@googlegroups.com

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[Mahesh Tak]

After the announcement of same-day-clearing of local cheques, SBI has
changed its software to SHOW realisation date same as posting date.
Earlier it used to be different. So legally their records show same
day clearnace, but, final balance is updated only after RBI clearance
(i.e. after 3 days).

Clever(?) way of circumvention!

Mahesh Tak

On Sep 16, 6:59 pm, "M.K. Gupta" <mkgupta...@yahoo.co.in> wrote:
> FYI
>  
> CONSUMER PROTECTION - CLEARANCE OF LOCAL CHEQUES
>  
> AS PER A RECENT AD OF THE MIN. OF CONSUMER AFFAIRS:
> PAYMENT OF THE LOCAL CHEQUE SHOULD BE MADE ON THE SAME DAY OR ON NEXT WORKING DAY AT THE MOST.
>  
> OUTSTATNION CHEQUES SHOULD BE CLEARED WITHIN 7/10/14 DAYS AS PER POLICY OF THE RESPECTIVE BANK. IN CASE OF DELAY, BANK SHOULD PAY INTEREST FOR THE DELAYED PERIOD.
>  
> m k gupta
>

>       Unlimited freedom, unlimited storage. Get it now, onhttp://help.yahoo.com/l/in/yahoo/mail/yahoomail/tools/tools-08.html/

[nishantb]

it has been some 15-20 days back when this information was published
in the newspaper by the National Consumer forum it specifically said
that all local and outstation chques should be credited/debited the
same day or at maximum the next day in case of local cheque's and the
outstation cheques should be credited/debited with in 7/10/14
days...here is the copy of the said order..and what is worth
appreciation and noting is that the Court in the last line of the
judgement have appreciated the complainant for bringing such a case in
front of the court...


here is the complete order of the Hon'ble Court..


NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION

NEW DELHI





CONSUMER COMPLAINT NO. 82 OF 2006


Atul Nanda & Anr. …
Complainants
Versus
Reserve Bank of India & Ors. … Opposite Party




BEFORE :

HON’BLE MR. JUSTICE M.B. SHAH, PRESIDENT

HON’BLE MRS. RAJYALAKSHMI RAO, MEMBER

HON’BLE MR. JUSTICE K.S. GUPTA, MEMBER





For the Complainants : In person



For the Opp. Parties : Mr.Avneesh Garg, Advocate for

OP 1 (RBI)



Mr.S.L. Gupta, Advocate & Mr. R.K. Dikshit Advocate for Opp. Parties
3,18,21,36,37,38,39,41,43,69



Mr.Harsh Jha and Mr.Dhruv Mehta, Advocates for OP 4



Mr.R. Majumdar, Advocate for OPs 5, 10, 14



Mr.P.B. Agarwala, Advocate for OPs 6, 60



Mr.V.K. Tandon, Advocate for OP 7



Mr.Pradeep Dewan, Mr.Anupam Dhingra, Advocates for OP 8



Mr. Rohit Madan, Advocate for OP 9


Mr. Bishwajit Bhattacharya, Sr.Advocate with Mr. Debashish Mukherjee,
for OP 12



Mr. Rambir Singh and Mr.Kunal Tandan, Advocates for OP No.13



Mr.Krishna Mohan, Advocate for Mr. R.N. Rout, Advocate for OP 15



Mr. Saran Suri, Advocate for OP 16



Mr.H.D. Talwani, Advocate for OP 17



Mr.Anshu Mahajan, Advocate for OP 19



Dr.Sunil Narula, Advocate for OP 20



Ms.Richa Choudhary, Advocate for OP 22, 32 and 57



Mr.Ajay Monga, Advocate for OP 23, 29



Mr.Dharam Dev, Advocate for OP 25, 55



Mr. Abhishek Kumar, Advocate for OP 26



Mr. S.S. Salooja, Advocate for OP 27

Mr.Rajender Kumar, Advocate for OP 30 and 33



Mr.P.S. Shetty, Advocate for OP 35



Ms.Deepti and Mr.P.I. Jose, Advocates for OPs 40 and 47



Mr. D.P. Chaturvedi, Advocate for OP 44



Mr. S.K. Garg, Advocate for OP 45



Mr. Dveep Ahuja, Advocate with

Mr. V. Ramakrishna, Manager (Legal) for OP 46



Mr.Vijay Kumar, Advocate for OP 48



Mr.Devendra Sain, Advocate for OP 49



Mr.K.J. Naik and Mr.Subhash Chand, Advocates for OP 51



Mr.J.Pradhan, Advocate for OP 52



Mr. K.K. Mani, Advocate for OP 54



Mr.Manoj Arora, Advocate for OP 56



Mr. Vijay Kumar Gupta, Advocate for OP 63



Mr.L.K. Bhushan and Mr.Anshu Bhanot, Advocates for OP 66



Ms. Nirmal Mishra, Advocates for OP 76



Mr.Manish Khandelwal, Advocate for OP 79

Ms.Surekha Raman, Advocate for OP 88 and 90



27.08.2008



ORDER


Heard the learned counsel for the parties.

The question which requires consideration in this complaint
is whether a consumer can seek any relief in cases :

i) where there is delay in encashment of local
cheques and long delay in clearing of outstation cheques ; and

ii) non-payment of interest/compensation for such
delay.



In this complaint, after issuance of Notice and after hearing the
learned counsel for the Reserve Bank of India (hereinafter referred to
as the RBI for short) and various other banks, on 9.11.2006, inter
alia, the following order was passed :
“It is the contention of the complainant that despite the various
Committee Reports, appropriate action is not taken by the Reserve Bank
of India (RBI) with regard to recommendation for introduction of
policy to curtail Banks’ enjoyment of float funds. Relevant part of
the same is as under :



“Need for introduction of policies to curtail bank’s enjoyment of
float :



The need for passing the interest benefits to payees on their cheque
proceeds once the payee’s bank (and not payees’ account) receives
credit from the drawee bank is of significant consequence. No passing
of such interest benefits to the customers allows the banks to enjoy
float and leads to undue enrichment of banks at the cost of their
customers. Presently, as per data available (See Appendix C), in one
year nearly 13,000 lakh cheques are cleared attributing to a total
amount of more than Rs.1,13,37,000 crores. Giving benefit of doubt to
banks and considering that for at most 50% of the cheques banks are
not enjoying any kind of float, it would mean that on an average the
banking sector enriches itself (at the cost of its customers) to the
tune of at least one days interest on at least 56,68,500 crores. On
this one-day’s interest, even at a conservative rate of interest of 4%
per annum, amounts to more than Rs.621 crores. In fact the empirical
study presented in Section 5 indicates that, on an average, the float
enjoyed by banks is 4 and 6 days (while they take 11 and 16 days for
collecting cheques) for metro and state capital respectively. For
other centers it would be anybody’s guess what the float period could
be!



The totality of huge float being enjoyed by banks is actually an
unaccounted credit taken from the depositors without their explicit
consent. The vital question here is why are the banks being allowed
to enjoy even one-day’s float?”



He further submitted that the vital question, why the Banks are being
allowed to enjoy even one day’s float, is required to be answered by
RBI. For this purpose, the complainant submits that RBI itself has
issued circular dated 1.11.2004 to all the Scheduled Commercial Banks,
wherein it is stated as under :



“Adequate care also may be taken to ensure that the interests of the
small depositors are fully protected. The policy framed in this
regard should be integrated with the deposit policy formulated by the
bank in line with the IBA’s model deposit policy. The policy should
clearly lay down the liability of the banks by way of interest
payments due to delays for non-compliance with the standards set by
the banks themselves. Compensation by way of interest payment, where
necessary, should be made without any claim from the customer.”



The complainant submits that this particular part is still not
implemented by various Banks.

As against this, learned counsel appearing on behalf of the Banks
submit that at least 80 Banks have formulated their own policy and are
following the same. They have produced a note issued by Indian
Banks’ Association (IBA) wherein it is contended that the data given
by the complainant is incorrect.

Prima facie, it appears that even though the Banks have formulated
their own policy with regard to float fund, credit is not given to the
payee immediately and the interest thereon is also not paid and,
hence, the Banks enjoy the said fund without paying any interest.

Considering the aforesaid aspect, Central Government and RBI are
directed to state on affidavit as to what steps can be taken for
minimizing the loss to the consumers because of the floating fund.
Further, RBI should state on affidavit whether the Guidelines issued
by it are properly implemented by the Banks by framing reasonable
policies in conformity with the Guidelines.

Some of the officers of different Banks, who are present in the Court
submits that with regard to the local clearance of cheque, as soon as
the cheque is presented/deposited for clearance with the Bank, credit
is given but the funds are not allowed to be withdrawn till the amount
is received by the Bank and, therefore, there is no loss of interest
to the customer.

Prima facie, it is apparent that this policy followed by some Banks is
required to be uniformly adopted by rest of the Banks.





Thereafter, various orders were passed from time to time.

On 21.5.2007, after considering the affidavits and hearing
the parties, the following order, inter alia, was passed :

“For the local cheques, it has been pointed out that most of the Banks
who have filed affidavits and have stated that credit and debit of the
cheques is being given or would be given on the same day.

In view of the aforesaid affidavits and the stand of the RBI, RBI to
consider and decide whether appropriate guidelines can be issued for
this purpose.

Regarding outstation cheques, RBI may find out solution so that there
may not be any floating of money for a longer time.”



By order dated 21.4.2008, we framed the question for
decision in the matter with regard to the alleged float arising out of
the delay due to non-clearance of outstation cheques for a long
period. The question which was framed is as under :

“Whether a consumer, who suffers in case when the cheque deposited by
him for collection of amount is honoured by the drawer bank (say on
1.4.2008) and the information is received by the drawee bank (say on
15.4.2008), should get interest or whether no interest is payable to
him by either of the banks (either drawer or the drawee bank) because
it is a transit loss?



Thereafter, the matter was heard on various dates and
necessary directions were issued from time to time.

On 30.7.2008, after hearing the learned counsel for RBI and
various banks, the following order, inter alia, was passed :

“From the submissions made by the learned counsel for the banks, it
appears that some delay occurs because of the clearing bank in
clearing the cheques. Firstly, it is to be stated that the clearing
bank is also expected to clear the cheques either on the date when it
is received or on the next date but it has no business to keep the
cheque uncleared for more than 48 hours. If they cannot do such
business then it is for the RBI to control such banks on the ground
that they are not in a position to discharge their banking functions
effectively. Normally it is expected that the cheque would be cleared
at least on the same date when it is received or on the next day by
the clearing bank.



Next step would be its communication to the collecting bank. In this
country, we have very good network of postal department. Any letter
from one corner to the other corner of the country could be sent
within a maximum period of 4 to 5 days. Therefore, even an outstation
cheque which is to be cleared from a remote village also may not take
more than 4 to 6 days time for its clearance. In addition to this
period, it may take further 5 to 6 days for its communication to the
collecting bank. This would require that the collecting bank and the
clearing bank would act promptly on receipt of the cheque and take
steps for clearance as early as possible.



Therefore, to contend that such outstation cheque would require more
than 14 days for its payment to the payee cannot be justified.



Hence, in our view, the order dated 14th July, 2008 does not require
any clarification or modification.



However, it is directed that if there is any unjustified delay on the
part of the clearing bank, the consumer should be informed about it,
so that the consumer can take appropriate action or he could refer it
to Ombudsman for taking appropriate action. In any case if it is
informed to the consumer that the delay was on account of clearing
bank, then for the unjustified delay by the clearing bank, the
collecting bank would not be liable to pay interest beyond 14 days.



But, in above cases also, it should not exceed the period/days
prescribed in terms of bank’s policy and would pay interest as per its
policy.



It is also made clear that if any bank receives the clearing advice
from the clearing bank prior to outer limit specified in their
respective policies, the credit shall be given on the same date or on
the following date.



The banks shall file compliance report to the order dated 14th July,
2008 within a period of two weeks from today.”



Today, it is pointed out that, to provide for the regulation
and supervision of payment systems in India and to designate the
Reserve Bank of India as the authority for that purpose and for
matters connected therewith or incidental thereto, the Parliament has
passed ‘The Payment and Settlement Systems Act, 2007’ (hereinafter
referred to as the Act for brief) which has come into force with
effect from 12.8.2008. On the basis of the aforesaid Act, RBI also
framed regulations, which have also come into force with effect from
12.8.2008.

Under the said Act, Reserve Bank of India (hereinafter referred to as
the RBI for short) is required to provide regulations and supervision
as stated in Section 10 of the Act. Section 10, inter alia, provides
as under :

“10. Power to determine standards – (1) The Reserve Bank may, from
time to time, prescribe-

(a) …………………..

(b) The timings to be maintained by payment systems;

(c) The manner of transfer of funds within the payment
system, either through paper, electronic means or in any other manner,
between banks or between banks and other system participants;

(d) Such other standards to be complied with the payment
systems generally;

(e) ……………………………….”



Further, Section 18 of the Act empowers the RBI to give directions
generally. RBI is also empowered to impose fine under Section 30 in
appropriate cases. Under Section 38 of the Act, RBI is also required
to make regulations, inter alia, for the format of payment
instructions and other matters relating to determination of standards
to be complied with by the payment systems under sub-section (1) of
section 10.

Considering the wide powers, which are given to the RBI
under the Act, we hope that RBI would try to control the float, if
any, arising due to delay in payment of the amount in case of
outstation cheques.

It is also hoped that the “Challenges Ahead” noted in the
speech delivered by Mr. V. Leeladhar, Deputy Governor, RBI on 1.8.2008
at Mumbai, would be taken care of by the RBI as well as by all the
banks. The said “Challenges Ahead” are as under :

“We have no doubt covered considerable ground in modernizing our
payment and settlement system. The banking system too has made
considerable investment in the related infrastructure to upgrade the
payment system. However, there are several challenges that need to be
effectively addressed if the full benefits of the achievements so far
are to be reaped.

One of the main challenges in the payment system area is to promote
large-scale use of the electronic modes of payment across the country
and requires addressing the constraints that impede the adoption of
this mechanism. To my mind, the primary reason for slow pace of
adoption of the electronic modes of funds transfer, particularly in
the retail segment, is the lack of education – particularly on the
part of the bank staff at the branch level that have interface with
the public. A survey conducted by one of the Regional Offices of the
RBI in the recent past revealed that in the limited sample covered,
there were several bank branches in the State which were not even
aware of the National Electronic Fund Transfer System. The banks,
therefore, need to make concerted efforts to increase the degree of
awareness at the level of the branch staff so that the electronic fund
transfer services percolate down to the level of the public in a
significant manner.

The other side of the coin is the lack of customer education and
awareness about the features and benefits of the EFT, which precludes
wider adoption of this product and leads to carrying on with the
traditional modes of payment. I would, therefore, like to urge upon
the banks to launch a systematic educational campaign for their
clients to educate them of the suite of electronic products offered by
them. This would not only reduce the avoidable paper work in the
operation of the banks but would also improve the quality of customer
service and eventually, business volume.

In so far as the RBI is concerned with a view to promoting the
electronic payment culture and to make it more user-friendly, the RBI
has intervened and mandated reasonability in pricing of transactions
effect6ed through ATMs and compulsory use of electronic mode for
transactions above a specified threshold. The service charge levied
on banks by the RBI for ECS, EFT / NEFT and RTGC transactions has been
waived until March 2009, so that this benefit of reduced costs is
passed on to customers, and the right incentive framework is created
for the use of electronic retails payment products. Similarly, the
limits set for ECS and EFT / NEFT transactions were also dispensed
with in November 2004 with a view to expanding the user base. This,
of course, is apart from various measures taken by the RBI for
strengthening the payment systems infrastructure in a variety of
ways.



Although the share of electronic payment products is improving in the
overall retail segment, the share of public sector banks in this area
is very low even as the number of branches offering the electronic
payment facility is increasing. It is, therefore, necessary to make
these products available across all bank branches. There is also a
need to focus on expanding the geographical reach of the electronic
payment services so as to include the segments of the population not
yet toughed by it. It is difficult to achieve financial inclusion
without encompassing rural-India in the payment system out-reach and
the banks that do so first, will reap the rewards of the ‘first-mover
advantage’ in terms of higher market share, with the concomitant
increase in business and revenues. And as we all know, the electronic
payment medium is not only speedier and more efficient, but is also
more environments friendly as it reduces the reliance on paper
required for effecting payments. It is our vision that electronic
products reach a level of 50% by volume and 95% by value of the
aggregate payment system transactions in the country, the end of March
2009.

Then, there are also some nagging efficiency issues in the payment
system. Whilst the current clearing cycle of T+1 basis for the
cheques payable locally, compares favourably with the best in the
world, it is necessary to look into the entire cheque collection cycle
– from the time a customer deposits a cheque at a branch till the
point of realization of credit in his account. There is perhaps scope
for continuous improvement in overall collection cycle. Going by the
number of complaints received, it appears that customer-service in
this area is not very customer-centric.”





We further reiterate that the following order, which was
passed by this Commission on 14.7.2008, shall be implemented by all
the banks :

“On the basis of the various policies framed by the Banks and the RBI
directions, it is directed that:

(a). For the local cheques credit and debit shall be given on the
same day or at the most on the next day.

(b). The maximum period for collection of outstation cheques
shall be 7/10/14 days. And, if there is any delay in collection of the
said chques beyond the period of 7/10/14 days, interest at the fixed
deposit rate, or at a specified rate as per the respective policy of
the banks, is to be paid to the payee of the cheques;

(c). The salient features of the policy with regard to the
collection period of outstation cheques and interest payable thereon
in case of delay shall be published on the notice board in a precise
manner in bold/visible letters at conspicuous place in every branch.

All the banks are, therefore, directed to comply with the same within
a period of two weeks, if they have not complied with the aforesaid
RBI directions uptil now.

(d). A copy of the complete policy shall be made available by the
Branch Manager, if the consumers require the same for reading.

(e). The salient features highlighting the rights of the
consumers shall also be displayed on the notice board of each branch
of the Banks.

(f). Needless to say that the RBI would monitor the directions
given by it as well as this Commission.”





By our order dated 19.8.2008, we had directed the State Bank
of India (SBI), Standard Chartered Bank and HSBC Bank to publish the
operative part of our order dated 14.7.2008 at their joint cost in at
least two leading newspapers which are published from Delhi and
Mumbai. Learned counsel for the SBI submitted that the said order has
been complied with. He has also produced a photocopy of the said
publication issued in the Delhi Edition of the Times of India and
Indian Express dated 27.8.2008. The same is taken on record. The
cost incurred by the SBI in publishing the same shall be equally
shared by SBI, Standard Chartered Bank and HSBC Bank, as agreed. It
would be open to the SBI to recover the said amount from the aforesaid
two banks.

This complaint, at this stage, stands disposed of accordingly. It
would be open to the complainant and/or voluntary consumer
organizations to approach this Commission in future for appropriate
relief, in case, there is deficiency in implementation of the Act and
its Regulations (as defined in Section 2(1)(g) of the Consumer
Protection Act).

We appreciate the hard work done by the complainants in drawing our
attention to various reports and making the consumers aware of their
rights.



……………………………………….J.

( M.B. SHAH)

PRESIDENT





…………………………………………

(RAJYALAKSHMI RAO)

MEMBER



……………………………………….J.

(K.S. GUPTA)

MEMBER