Cheque Collection Policy

1. Introduction

The Cheque Collection policy of the Bank reflects its effort to provide better service to customers and set higher standards for performance. The policy is based on principles of transparency and fairness in the treatment of customers. The Bank is committed to providing quick collection services & convenience to customers with the increased use of technology in the payment & settlement process.

2. Objective

The key objectives of the policy are:

• Collection of cheques and other instruments payable locally, at centers within India.
• Bank's commitment regarding time norms for collection of instruments.
• Policy on payment of interest in cases where the Bank fails to meet time norms for realization of proceeds of outstation instruments.
• Policy on dealing with collection instruments lost in transit.
• Policy on management of customer accounts with Frequent Dishonor of Cheques.

3. Definition

Drawee - is a legal and banking term used to describe the party that has been directed by the depositor to pay a certain sum of amount to the person presenting the cheque.

Payee - is a party in an exchange who receives payment.

Drawer - is a maker of a cheque/draft/letter of credit who directs the drawee (the bank) to pay the stated amount to a payee.

MICR - stands for Magnetic Ink Character Recognition, is a technology used to verify the legitimacy or originality of paper documents, especially cheques. Special ink, which is sensitive to magnetic fields, is used in the printing of certain characters on the original documents.

CTS - CTS (Cheque Truncation System) is the process of stopping the physical movement of cheques issued by drawer and replacing them by electronic images and associated MICR line of the cheque.

Grid Clearing - Grid Clearing is an arrangement that allows banks to present/receive cheques from/to multiple cities in a Single Clearing House through a service branch at one city.

Now RBI has merged all clearing grids into National Grid as per One nation one grid project.

4. Arrangement for Collection

The Bank shall accept cheques conforming to CTS 2010 standards from customers / depositors over the counters at its branches, through drop boxes installed in its branches during business hours. The Bank shall provide acknowledgement for the cheques collected over the counter at its branches.

The Bank shall accept a cheque for collection even if the date mentioned on the cheque is a date in Hindi or a regional language or if the date is as per the National Calendar (Saka Samvat), if the cheque is otherwise in order. It should ascertain the Gregorian calendar date corresponding to the National Saka calendar date in order to avoid collection of stale cheques.

The Bank shall not collect cheques that are presented beyond the period of 3 months from the dates mentioned on the instruments. RBI has directed that no changes/corrections are permissible on cheques presented for collection through CTS clearing, with the sole exception of date of the cheque.

The Bank shall subject the cheques accepted for collection to scrutiny under ultraviolet lamps and other such checks as deemed fit and reject instruments that are suspected to have been tampered with. Instruments that pass scrutiny and other checks will be collected on a good faith basis with recourse to the account holder / depositor. This will help in identification and control of fraudulent alterations.

4.1 Local Cheques

Local cheques are payable within the jurisdiction of the clearing house and will be presented through the clearing system prevailing at the center. Credit arising out of local cheques shall be given to the customer's account as indicated in the Cheque Collection Policy (CCP) of the Shivalik Small Finance bank.

Cheques deposited at SSFB branch counters and in collection boxes within the branch premises before the specified cut-off time will be presented for clearing on the same day. Cheques deposited after the cut - off time will be presented in the next clearing cycle.

As per compensation bank would give credit to the customer`s account on the same day when clearing settlement takes place, which is in general T+1 without any extension. Withdrawal of amounts so credited would be permitted as per the cheque return schedule of the clearing house.

All cheques received by any of the branches of the bank in inward clearing will be treated at par and clearing charges will not be levied to the accounts for debiting such cheques.

4.2 Time Frame for Collection of Local cheques:

For local cheques presented in clearing, customer account will be credited on the date of settlement of funds, and they will be allowed to withdraw the funds as per return clearing norms.

Cheques sent for collection to centers within India will need to comply with the following timelines:

• Cheques payable at CTS centers: Maximum period of 7 days.

4.3 Cheques Drawn on Foreign Countries

Cheques drawn on foreign country's instruments are accepted for collection on "best of efforts" basis. The Bank may enter into specific collection arrangements with its correspondent bank for speedy collection of such instruments. The Bank would give credit to the party on credit of proceeds to the Bank's NOSTRO Account with the correspondent bank after taking into account cooling periods as applicable to the countries concerned.

4.4 Purchase of Local Cheque

Bank may, at its discretion, purchase local cheque tendered for collection at the specific request of the customer or as per prior arrangement. Besides satisfactory conduct of account, the standing of the drawer of the cheque will also be a factor considered while purchasing the cheque.

4.5.1. Purchase of Local Cheques, Demand Drafts, etc. during suspension of clearing

Whenever clearing is suspended and it is apprehended that the suspension may be prolonged, Bank shall temporarily accommodate its constituents, both borrowers and depositors, to the extent possible by purchasing the local cheques, drafts, etc., deposited in the accounts for collection, special consideration being shown in respect of cheques drawn by Government departments/companies of good standing and repute, as also demand drafts drawn on local banks.While extending this facility, Bank shall take into consideration such factors as creditworthiness, integrity, past dealings, and occupation of the constituents, so as to guard itself against any possibility of such instruments being dishonored subsequently.

4.5 Immediate Credit of Local /Instruments

No immediate credit of local cheques would be given as the bank also endeavors that delays do not occur in realization of proceeds of the cheques.

4.6 Third Party Endorsements

Reserve Bank of India has prohibited banks from crediting 'account payee' cheque to the account of any person other than the payee named therein. SSFB does not collect account payee cheques for any person other than the payee constituent.

5. Payment of Interest for Delayed Collection of Cheques

For delayed clearing of cheque, compensation will be paid to the customer. The Bank shall pay interest, at the applicable savings account rate, to the customer on the cheque amount in case there is a delay in giving credit beyond the specified time period. Such interest shall be paid without any demand from customers in all types of accounts. For acts beyond the control of the Bank, the Bank shall not be liable to compensate customers for delayed credit in case of unforeseen event including but not limited to civil commotion, sabotage, lockout, strike or other labour disturbances, accident, fires, war, damage to the Bank's facilities or of its correspondent bank(s), absence of usual means of communication or all types of transportation, etc., or any other events beyond the control of the bank that prevents it from performing its obligations within the specified service delivery parameters.

6. Instruments Lost In Transit/In Clearing Process or At Paying Bank Branch

In the event a cheque or an instrument accepted for collection is lost in transit or lost in the clearing process or lost at the paying bank's branch, the Bank shall immediately upon receipt of such information, bring the same to the notice of the account holder through any of the channels i.e., in writing, call, SMS, or email so that the account holder can inform the drawer to record a stop payment against the instruments and also take care that cheques, if any, issued by him / her to the extent of amount of loss cheques are not dishonored due to non-credit of the amount of the lost cheques / instruments.

The Bank would provide all assistance to the customer to obtain a duplicate instrument from the drawer of the cheque.

Bank shall compensate the account holder in respect of instruments lost in transit in the following way:

• In case intimation regarding loss of instrument is conveyed to the customer beyond the time limit stipulated for collection. Saving account interest will be paid for the period exceeding the stipulated collection period.
• The Bank would also compensate the customer for any reasonable charges (up to Rs.500/- only) that he/she incurs in getting duplicate cheque/instrument upon production of receipt, in the event the instrument is to be obtained from a bank/ institution who would charge a fee for issue of duplicate instrument.
• The bank would also compensate the customer for any reasonable charges incurred due to delay in credit of lost cheque.

7. Dishonored Cheques

A cheque is said to be honored if the banks give the amount to the payee. While, if the bank refuses to pay the amount to the payee, the cheque is said to be dishonored. In other words, dishonor of cheque is a condition in which bank refuses to pay the amount of cheque to the payee.

7.1 Procedure For Return/Dispatch of Dishonored Cheques

The collection branch shall ensure that the dishonored cheques are returned or dispatched to the account holders or depositors promptly without delay, in any case within 24 hours from time of dishonor excluding holidays.

In case of returned cheques, a cheque return memo will be prepared by SSFB wherein the reason for return of the cheque will be indicated. The memo along with the dishonored cheque will be sent to the payee/depositor/account holder by registered post or through a local courier or will be handed over across the counter with an acknowledgement on register.

SSFB shall return or dispatch the dishonored cheques to the customer at his / her last recorded address available. In case a cheque has been received by another branch of SSFB on collection, it shall be dispatched to the sending branch along with the cheque return memo and advice within 24 hours from time of dishonor excluding holidays.

7.2 Dealing with Incidence of Frequent Dishonour of Cheque valuing Rs. 1 crore and above

With a view to enforcing financial discipline among customers, the Bank shall not issue a fresh cheque book for customer accounts where cheque valuing Rs. 1 crore & above have been dishonored on account of lack of funds, for 4 occasions in a particular financial year.

• If a cheque is dishonored for a third time on a particular account of the drawer during the financial year, the Bank shall issue cautionary advice to the concerned customer bringing the above-mentioned condition to his attention.
• The bank will consequentially stop the cheque facility in the event of cheque being dishonored on fourth occasion on the same account during the financial year. Similar cautionary advice may be issued if the Bank intends to close the account.
• However, in respect of advances accounts such as cash credit account, overdraft account, the need for continuance or otherwise of these credit facilities and the cheque facility relating to these accounts would be reviewed by appropriate authority higher than the sanctioning authority.

7.3 Dealing with Incidence of Frequent Dishonor of Cheque valuing below Rs. 1 crore

To enforce financial discipline among customers, the Bank shall consider the following for handling cases of Cheque Dishonour valuing less that INR 1 crore:

• Bank shall review the accounts where Cheques valuing less than Rs 1 Crore have been dishonored, due to lack of funds, for 6 or more occasions in a quarter.
• In the event of dishonoring a cheque drawn on a particular account of the drawer on Six or more instances, a cautionary advice to the customer would be issued.
• If the cheque return pattern is repeated by the customer in the next review cycle, cheque facility would be disabled in the account and fresh cheque book would also be restricted.
• The Bank may also consider closing such accounts at its discretion. Cautionary advice shall be issued to the customer if bank intends to close such accounts.
• However, in respect to CC/OD accounts, the need for continuance or otherwise of these credit facilities and the cheque facility relating to these accounts would be reviewed by an appropriate authority higher than the sanctioning authority.

7.4 Re-Presentation of Technical Return Cheques And Levy of Charges For Such Returns

If a cheque is returned for a technical reason and can be presented again without any action or intervention of the account holder or depositor's part, SSFB will present the cheque again, after intimating the account holder/depositor through one of the channels – by letter, via email, through SMS or over a phone call.

However, if an instrument is returned for reasons relating to availability of funds in the drawer's account or due to a technical reason which requires an action from either the drawer or the payee, SSFB will return the cheque to the payee/depositor/ account holder as per the process explained in section 7.1 above.

SSFB shall levy cheque return charges only in cases where the reason for return can be attributed to either the drawer or the payee. Charges will not be levied if the reason for return is attributable to the Bank.An illustrative list of returns, where the customers are not at fault are indicated in Annexure-I

8. Force Majeure

The Bank shall not be liable if any transaction does not fructify or may not be completed or for any failure on part of the Bank to perform any of its obligations contemplated hereunder if performance is prevented, hindered, or delayed by a Force Majeure event (defined below) and in such case its obligations shall be suspended for so long as the Force Majeure.

"Force Majeure Event" means any event due to any cause beyond the reasonable control of the Bank, including without limitations, unavailability of any communication systems, breach, or virus in the processes or payment or delivery mechanism, sabotage, fire, flood, explosion, natural disasters or other "Acts of God", war, damage to the bank's facilities or of its correspondent bank(s), civil commotion, strikes or industrial action of any kind, riots, insurrection, war, acts of government, computer hacking, unauthorized access to computer data and storage devices, computer crashes, malfunctioning in the computer terminal or the systems getting affected by any malicious, destructive or corrupting code or program, mechanical ortechnical errors/failures or power shut down, faults or failures in telecommunication etc. which prevents it from performing its obligations within the specified service delivery parameters.

9. Annexure - I

Illustrative but not exhaustive list of objections where customers are not at fault

10. Review

Any Changes to the policy will be approved internally through the relevant Board approved committee. The policy as a rule will be reviewed at the Board level once a year. If there is a major change made, it will be ratified by the Board in the next meeting.