Positive Pay System - A product of NPCI

POSITIVE PAY SYSTEM INTRODUCED BY RBI -AN EXPEDIENT STEP TO CURB FRAUD IN CTS BASED CLEARING CHEQUE

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21st century will be regarded as one of the most ?historic revolutionary era with the advent of a blend of several ?innovative digital payment systems transforming the entire banking industries . Now customer of the bank does not even visit a branch for opening of account and maintenance of all records including use his mobile for almost all types of transaction intra bank and inter bank, many newly developed features of multiple payment app , such as, Paytm, Google pay, Amazon pay, etc. online through smart android and apple based smart mobile from anywhere and anytime, some of them 24*7 and rest as per pre determined RBI/Bank extant guidelines. Some of them exit before 2st century but it features enhanced, cost of transaction becomes nominal compared to traditional Brick and mortar banking.

?It happened after core banking branch less technology, precisely means customer is not a customer of a particular bank Branch but a Bank. This made possible to implement additional intra banking transaction like NEFT, RTGs ,IMPs, UPI?apart from traditional intra bank clearing systems to initially internet banking and now mobile Banking.

In spite of the above alternatives, due to some business or?other reasons, intra bank clearing method is still continuing but with improved version and technology advanced method .

Presently, all over India CTS 1o compliant cheque??having the following security features across all the participating Banks ?has been done controlled by NPCA : ?

?BENEFITS OF CTS TO CUSTOMERS

?1.??The electronic movement of images can facilitate reduction in the clearing cycles and nil chance ?of loss of instruments in transit.

?2.??No ?limitations of the existing clearing system in terms of geography or jurisdiction enabling consolidation and integration of multiple clearing locations managed by different banks with varying service levels into a nation-wide standard clearing system with uniform processes and practices.

?3.??????Under grid-based Cheque Truncation System clearing, all cheques drawn on bank branches falling within in the grid jurisdiction are treated and cleared as local cheques. No outstation cheque collection charges/Speed Clearing charges to be levied if the collecting bank and the paying bank are located within the jurisdiction of the same CTS grid even though they are located in different cities.

?4.?????CTS also benefits issuers of cheques. The Corporates if needed can be provided with images of cheques by their bankers for internal requirements.. CTS thus brings elegance to the entire activity of cheque processing and clearing.

?5.??All the above systems provides benefits, such as,?Shorter clearing cycle, Superior verification and reconciliation process, No geographical restrictions as to jurisdiction, Operational efficiency ,Reduction in operational risk and risks associated with paper clearing, No collection charges for collection of cheque drawn on a bank located within the grid, etc..

?BENEFITS OF CTS TO BANKS

?1.???Grid based CTS provides significant cost savings. Consolidation of clearing locations into a few grids minimize the investment in MICR machines and the related AMC costs.

?2.???Banks will benefit from economies of scale as the grid CTS obviates the need for establishing inward cheque processing infrastructure at various clearing locations. With the merger of many local clearing houses with CTS grids, the settlements which were earlier spread across numerous clearing house locations have been subsumed into a single settlement, thereby significantly reducing the liquidity requirements for the banks.

?3.???CTS?other benefits are nominal ?cheque processing fee, reduction in operational overhead, elimination of clearing differences and reconciliation issues etc.

?INTRODUCTION OF POSITIVE PAYMENT SERVICE BY RBI WITH EFFECT FROM 01.01.2021

?In a press conference on 06.08.2020 , RBI has announced a slew of major corrective measures, inter alia , which are as under:

1.??Positive Pay System(PPS) for CTS 10 clearing with effect from 01.01.2021

?2.???Payment System Operators (PSOs) to introduce Online Dispute Resolution (ODR) ?make aware the Bank in phased manner to promote digital transaction more transparent and settlement of failed transaction without involvement of any manual interference.

POSITIVE PAY SYSTEM IMPLEMENTED

??The Cheque Truncation System for clearing cheques is operational pan-India and presently covers 2 per cent and 15 per cent of total retail payments in terms of volume and value respectively; the average value of a cheque cleared in CTS presently is ?82,000. The CTS-2010 standard specifying minimum-security features on cheque leaves acts as a deterrent against cheque frauds, while standardization of field placements on cheque forms enables straight-through-processing by use of optical / image character recognition technology. To further augment customer safety in cheque payments and reduce instances of fraud occurring on account of tampering of cheque leaves, it has been decided to introduce a mechanism of Positive Pay System for all cheques of having value ?50,000 and above. Under this mechanism, cheques will be processed for payment by the drawee bank based on information passed on by its customer at the time of issuance of cheque. This measure will cover approximately 20 per cent and 80 per cent of total cheques issued in the country by volume and value, respectively. But it is made optional for customers.

The Positive Pay System, developed by the National Payments Corporation of India, is?a process of reconfirming the key details of large value cheques.. The details are cross-checked while issuing the cheque and any discrepancy is flagged . Under this procedure, the customer?to inform the Bank the Cheque no., date, payee name, Amount by duly filled up PPS form or mobile banking or retail internet. Corporate customer will through corporate internet or duly signed PPS form while issuing cheques to their clients.

?RBI has observed the present CTS cheque clearing method, each bank formulated their own guidelines for passing high value cheque presented in clearing. Some banks are adhering ?to a guidelines to pass the cheque having a pre- determined thresh hold value, only after getting telephonically or employ any other method getting confirmation of the drawer required. As all the customers are not aware about the procedures, making complains against the Bank in various forum resulting into embarrassing situations to bank.

?RBI observed that the most of Customers of Bank do not well aware of the its own above guidelines, ?even though many customers still becoming victim of??cheque cloning fraud ?. As the number of such cases grew, RBI felt necessary to direct each Bank to adopt by Board approved ?Standard operating procedure to decide the value of cheque that will be passed after following the mandatorily implementation of PPS before 01.01.2022. to avoid such inconveniences and customer complains.?Banks have also been?directed to disseminate the above guidelines widespread.

?WHAT IS THE BENEFIT OF CUSTOMER AND BANK

?The customer will keep assured that no high value cheque?will be passed of high value as soon as Bank receives the message through internet or physical form, it will be capture?by the system. While passing pop window will open and tally veracity of cheques based on the information given by the customer. No alteration is possible.

?CONCLUSION

?The digitalization of banking industry has been taking astonishing pace and with the help of door step banking, Internet of things, Artificial Intelligence, Machine learning, cloud computing, it will be no surprise that many of customers will be full filled without visiting the Branch. The Deputy Governor, during a press meet already informed that some bold steps are being made to issue virtual currencies. The dependence of physical cash will decrease day by day.

?It has been already popularized during the past ten years spread of Cryptocurrency, main two currency are Bitcoin and Etheram, has already hot discussion and deliberation by controlling authority to understand it is ethical or allowed to continue. What may be result?in future, in the field of transaction between two parties?will happen globally any place to any place without involvement of any other method. The future of money and financial transaction among two parties will be made possible at much faster without any currency conversion charge.

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