Monday, December 12, 2011

Electronic cheque clearing most likely from next week

The much-hyped Electric Cheque Clearance (ECC) is going to start most likely from next Monday.
"We are planning to start operation of Electric Cheque Clearance (ECC) from coming Monday," said the chief executive of the Nepal Clearing House Ltd (NCHL) Nilesh Pradhan.
"We are ready with the required infrastructure and have also applied for the operation approval at the central bank," he said, adding that the company will start its operation once it gets green signal from central bank.
"But it will be in operation in the Kathmandu Valley only in the beginning," he said, adding that it will take couple of months to expand the service across the country.
The NCHL has postponed its operation twice due to dispute among the banks and financial institutions regarding the high cost. However, Pradhan claimed that most of the commercial banks that were earlier opposing it have signed agreement with the company to upgrade to the electronic cheque clearing system.
The banks and financial institutions are, however, still not comfortable with transaction cost. "The recurring cost could become burden for the financial system in the long run," a banker said, adding that the transaction cost has to be brought down as the banks cannot pass on the cost to the customers, neither they can bear it themselves.
According to the current structure, it will cost Rs 10 per cheque above Rs 5,000 and Rs 5 for a cheque upto Rs 5,000 transaction cost, except the costs that banks and financial institutions have to bear to get membership of the clearing house, buy software, network connectivity, login fee and annual renewal fee, which they are claiming to be high.
"System upgradation is a must but the central bank has to find out a way to subsidise the cost," president of Nepal Finance Companies Association Rajendra Man Shakya opined, adding that the development banks and finance companies are ready to upgrade but the cost has to be acceptable to all.
"The Class B and Class C financial institutions have to bear 64 per cent of the cost and the Class A financial institutions will bear only 36 per cent of the total cost, whereas 70 per cent of around 25,000 cheques that come for clearance everyday belongs to the commercial banks and only 30 per cent belongs to development banks and finance companies," he added.
The central bank has also been blamed for discouraging the government policy of transacting through cheque of over Rs 50,000 by making it expensive for the customers, though the central bank has cautiously said that it will not let the banks and financial institutions pass on the cost to customers.
Currently, the NCHL has central bank, Nepal Bankers Association (NBA) and SCT that provides integrated shared services network for ATMs and Point-of-sale (PoS) terminals — as its share holders as the development banks and finance companies are yet to decide their participation model.
But central bank has assured that it will keep the current manual system also in operation, if the development banks and finance companies could not participate.
But the bankers opined that the clearing house could not be able to even get its capital cost back, if the development banks and financial institutions do not participate in the system.

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