New cheque rules: 5 things to know

The Reserve Bank of India (RBI) recently changed cheque-rules to tackle the rise in cheque-related fraud cases. It asked banks to put preventive measures in place and follow them meticulously. It also issued some other guidelines in this regard. Here is what you need to know:

1) SMS alerts: The RBI asked banks to send an SMS alert to both payer and drawer when the cheque is received for clearing. Till now, SMS alerts were compulsory only for debit/credit card transactions. While dealing with suspicious or cheques of high value, banks have been asked to alert the customer by a phone call and obtain confirmation from both the parties involved in the transaction. The account holder’s bank branch must also be contacted.


2) Examination of cheques: Besides sending alerts, banks have been asked to examine cheques under UV lamp. This is applicable if the cheque amount goes over Rs 2 lakh. Also, a mechanism must be put in place to ensure multi-level checking of cheques for amount over Rs 5 lakh. Banks are also required to closely monitor how money is deposited or moved out from newly opened transaction accounts.

3) KYC compliance: Whenever you open a new bank account, you are supposed to go through a process called Know Your Customer or KYC. This is a must. It ensures that the bank verifies information about you, thus limiting fraud cases. So, it goes without saying that the person writing the cheque will be compliant with KYC rules. The RBI now states that even the recipient should be KYC compliant.

4) CTS-2010 cheques: The RBI asked banks to ensure the use of 100% CTS-2010 compliant cheques. As part of the Cheque Truncation System (CTS), an electronic image of the cheque is transmitted to the cheque-writer’s bank branch through the clearing house, along with other relevant information. It helps eliminate the need for physical movement of the cheque for verification. Thus the scope for fraud is reduced.
Many times, even though the original cheques were held by the account holder, fraudsters enchased cheques with the same number. So, banks have been advised to take appropriate precautionary measures to ensure that confidential information like customer name, account number, signature, cheque serial numbers and other information are verified and not misused in any way.

5) Cheque-handling infrastructure: Among other preventive measures, RBI stated that high quality of equipment and personnel must be ensured for CTS-based clearing. Banks should not look at it as a mere mechanical process, but consider it as an important part of cheque-handling.

Govt banks re-evaluating ATM charges

Even as State Bank of India, the country's largest lender, has decided to charge its customers for more than fivetransactions through automated teller machines (ATMs), private sectors banks continue to be on a wait-and-watch mode.

However, following SBI's decision, some major public sector banks are re-evaluating the cost of ATM transactions and are likely to take a decision on restricting the number of free transactions.

Among them is public sector lender IDBI Bank. A senior IDBI bank executive said: "As of now, the bank has not changed the terms for ATM usage though RBI (Reserve Bank of India) permitted us. But it has become an expensive proposition, especially when our customer uses other banks' ATMs. An internal assessment is underway for taking a call on revising the terms and charges."

IDBI Bank has 2,727 ATMs at the end of September 2014, he added. A Bank of India official also said they have not revised the charges as of now, but they will review the usage pattern and then take a decision accordingly.

Some public sector bank officials are also inclined to charge consumers for ATM transactions because of the high interchange fee that state-run banks end up paying private sector banks because of the latter's wide ATM network. Interchange fee is the amount a bank has to pay another if its customers make a transaction at the latter's ATM.

However, private sector lenders, especially the mid- and small-sized banks, have decided to play the waiting game and not look at charging their customers any time soon.

"Banks are playing the waiting game now. Even though it has been allowed by the regulator, the lenders are waiting to see who makes the first move in the private banking space. As a result, several banks have decided not to charge as of now," said a bank official from a private sector bank.

According to RBI guidelines, banks are free to charge their customers after the first five free transactions from November 1. RBI had stated that banks could choose to offer more than five free transactions, if they so wished.

The increase in charges by any bank will be applicable to transactions in the six metro cities of Mumbai, New Delhi, Chennai, Kolkata, Bengaluru and Hyderabad. These transactions mean both financial and non-financial balance enquiry, change of PIN, mini statement, etc.

Going ahead, industry players say that even if they levy any charges, it will most likely be free for customers who will maintain a certain average quarterly balance. "Most banks will not charge HNI (high net worth individual) customers. Moreover, they will ensure the number of free ATM transactions are kept free if you maintain a high average quarterly balance," said another private bank official.

However, the number of free transactions at ATMs of other banks has also been lowered to three.

Earlier, a customer had to pay up to Rs 20 for every transaction beyond five at non-home-bank ATMs. Now, the charges will apply only beyond three transactions at other bank ATMs.

According to RBI data, at the end of June, the number of ATMs in the country stood at 166,894.

Earlier, banks, in association with the National Payments Corporation of India, had sent a proposal to the banking regulator to reduce the number of free transactions at non-home ATMs. They had also sought to be allowed to charge consumers for use of own-bank ATMs.

CHEQUES & BALANCES 

Though SBI has decided to charge customers after the fifth transaction at its ATMs, its pvt sector peers are on a wait-and-watch mode

Some PSBs are inclined to charge consumers because of the high interchange fee - the amount a bank has to pay to another, if the former's customer makes a transaction at the latter's ATM

Under RBI guidelines, banks are free to charge their customers after the first five transactions from November 1

RBI had stated that banks can still choose to offer more than five free transactions, if they so wished

The number of free transactions at machines of other banks has also been lowered to three

Earlier, a customer had to pay up to Rs 20 for every transaction beyond five at non-home-bank ATMs. Now the charges will apply beyond three transactions at other bank ATMs

Free ATM transactions to be curtailed from today

New Delhi: From Saturday (November 1), frequent withdrawal of money from ATMs will be costlier with the Reserve Bank of India (RBI) having imposed a limit of 3 cross-bank transaction per month from other banks and 5 from same bank.

As per the new RBI guidelines passed earlier in August, a customer will have to pay a fee of Rs 20 per transaction for using the Automated Teller Machines (ATMs) beyond the permitted number of 3.

Prior to this, banks permitted 5 free transactions from cross-banks.

Customers will also be charge Rs 20 for using their own bank ATMs after the allowed 5 transactions limit.

These new guidelines, which were issued in pursuance of a representation made to the central bank by Indian Banks' Association, will come into effect from tomorrow in six metropolitan cities of Delhi, Mumbai, Chennai, Bangalore, Kolkata and Hyderabad.

"The number of mandatory free ATM transactions for savings bank account customers at other banks ATMs is reduced from the present 5 to 3 transactions per month (inclusive of both financial and non-financial transactions) for transactions done at the ATMs located in 6 metro centres," RBI said earlier in a notification.

The Reserve Bank of India (RBI) also made it clear that the said reduction will not apply to small/no frills/basic savings bank deposit account holders.

Also, it will not be applicable for account holders other than the six metro cities.

India has a total of 1.6 lakh ATMs across the country as of March 2014.