Redefining Cheque clearing process in India.

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In India most of the transactions are put through cash or cheque. Here is my suggestion to make cheque clearing user friendly with less human resource consumption.

Though big corporate use RTGS, small traders use cash or cheque. Constraints like, delay in realization (3-4 days), lost in transit, availability of funds etc, were forcing people to use cash.

If a trader bills are realized after 3 days, automatically his business cycle slow down by 3-4 days which will impact the productivity. I have suggestion to overcome this constraint.

Cheque flow process:

In India, Cheque truncation system (CTS) was implemented some 5 years back which was used by by western countries in the year of 1991. In CTS, cheque image was scanned and sent to the drawee bank which realizes the payment and send the amount to the payee bank. This process takes two days.

Many bank branches, especially in rural India are not having the CTS facility. They send cheque through post to the nearby city branches for collection which may take 3-4 days and even more depending on the place.

For example:

A rural SBI, RR pet branch receives a cheque drawn on HDFC, Mumbai branch. Now SBI,RR pet will send this to SBI, Mumbai branch for collection. SBI, Mumbai sends to HDFC, Mumbai for collection. This process may take 3-4 days.

My suggestion:

Change cheque design and reverse the process flow that is currently used.

The cheque should be designed in such a way that beneficiary’s account number and IFS code should also be asked along with name. Make the names of the account holders of all the banks accessible to all the banks.

Now, (above example) HDFC Mumbai branch customer will deposit the cheque along with Account number and IFS code of SBI, RRpet customer. HDFC, Mumbai will cross check the name and instantly send the funds directly to SBI, RRpet customer within an hour.

Here, there is no physical movement of the cheque. This makes the funds transfer faster. As the payments become faster, business cycle moves faster. This creates trust among the people and make them use cheque and cash less banking system. This can be effectively implemented by making the Govt departments using the new system first.

Illustration :

A trader(X) from Mumbai purchases goods from manufacture (Y) in a small village (RRPet) . X is HDFC customer and issues a cheque drawn on HDFC, Mumbai to Y. Now, Y deposits cheque in SBI, RRpet Branch..

The cheque process flow in existing and suggested system is given below.

NON CTS branches (Existing system): (images available in below link)

Constraints:

  • Atleast 5-6 staff involved, means wastage of human resource.
  • Minimum4-5 days for transferring the funds, slows down business cycle.
  • Chequemay dishonour for various reasons.


CTS branches (Existing system):


Constraints:

  • Atleast 3-4 staff involved, means wastage of human resource.
  • Minimum1-2 days for transferring the funds, slows down business cycle.
  • Chequemay dishonour for various reasons.

Suggested new system: (images available in below link)


Advantages:

  • Just one hour to complete the whole process, means quicker payments and faster business cycle.
  • Noquestion of dishonour.
  • Onlyone employee is used to process the payment, human resource can be saved.

Suggested New Design for the Cheque: (image available in below link)

Original link: 

https://www.quora.com/What-idea-did-you-share-with-PMO-India-You-may-share-even-if-it-is-not-implemented/answer/Kommina-Sivanand?srid=VtfM&share=1552e50c 



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