Central bank postpones deadline for use of electronic cheque till fiscal year end

As the central bank has postponed use of electronic cheque till mid-July, the banks and financial institutions that are the members of the Nepal Clearing House Ltd (NCHL) are mandated to use electronic cheque clearance (ECC) service from the start of the next fiscal year.

Differing the earlier deadline, the central bank has directed the banks to issue electronically readable standard cheques by the end of the current fiscal year.

This is the second postponement as earlier in October, postponing the earlier deadline, the central bank had asked the banks to start use of machine-readable cheques by mid-January, 2014.

In April 2013, the central bank had for the first time directed the banks and financial institutions to start using the fixed mid-July, 2013.

The banks and financial institutions have to issue new cheques according to Cheques Standards and Specifications Guidelines 2011 – instead of current ordinary cheques – to make the cheques compatible for electronic clearing.

The standard cheques will have a character recognition technology that will help facilitate the processing of cheques and will have the routing number and account number at the bottom of a cheque.

Though, Nepal Clearing House started electronically clearing Nepali currency cheques from April 2012, with Automatic Check Truncation and clearing systems with the current normal cheques, it still has not been able to make all the banks and financial institutions its members. Currently, it has

"NCHL-ECC is an image-based, cost-effective, magnetic ink character recognition (MICR) cheque processing and settlement solution, where an original paper cheque is converted into an image for electronic processing of the financial transactions between participating member banks and financial institutions," according to NHCL. "The physical movement of the cheques are truncated or stopped at the presenting bank and the cheques' images are electronically moved between the presenting and paying banks resulting in a faster and easier processing of the cheque transactions.

Manual cheque clearing closed in Birgunj

Nepal Rastra Bank has stopped manual cheque clearing in Birgunj.

Nepal Clearing House Limited (NCHL)'s electronic cheque clearing has come into full operation from all the branches of member banks and financial institutions  located in Birgunj.

It is a major milestone in the rollout of NCHL-ECC after having been fully operational from Kathmandu, where manual clearing was stopped from December 16, 2012 said NCHL chief executive Neelesh Pradhan. "With this, it is now possible for cheques being presented from/to any of the member banks in Birgunj to be processed the same day," he said, adding that some 41 banks and financial institutions that were members of manual cheque clearing.

Non-standard cheques (cheques currently in use) presented by 12:00pm and standard Magnetic Ink Character Recognition (MICR) enabled cheques presented within 14:00pm are cleared the same day, whereas cheques presented after the cut-off time will be cleared the next business day.

Some member banks may have set their own cut-off time and hence customers are required to consult their respective banks for such cut-off times.

NCHL currently has 101 member banks and financial institutions including Nepal Rastra Bank under its network.

Having been observed the benefits of national electronic cheque clearing, many of the member banks and financial institutions have already started using it from their branches across the country. After the successful migration of manual clearing to electronic cheque clearing at Birgunj, it is expected to provide additional boast for NCHL-ECC rollout in other regions also.

Central bank calls BFIs to mandatory shift to electronic cheque, NCHL-ECC upgrades system

The central bank has asked the banks and financial institutions to start using electronic cheque clearing from mid-December as the Nepal Clearing House Ltd (NCHL) has upgraded its electronic cheque clearing system, which has already come into use since the last week.

The new software comes with additional business functionalities making it easier for member banks and financial institutions to use the system, said chief executive of the clearing house Neelesh Pradhan.

"The performance and reliability of the NCHL-ECC system have also been improved," he said, expecting the new version to help NCHL handle increased number of memberships and thus increased cheque volume.

NCHL has already signed a membership agreement with 70 banks and financial institutions including Nepal Rastra Bank, 32 commercial banks, 19 development banks and 18 finance companies, of which, few of the newly joined members will start their NCHL-ECC service in the next couple of weeks.

NCHL expects to increase this number further in the coming days. Some of its member banks and financial institutions have also started providing electronic cheque clearing services from branches outside the valley.

NCHL has also approached other banks and financial institutions located outside Kathmandu valley for membership and the response has been positive.

NCHL, at present, clears Nepali rupees, US dollar, euro and British pound denominated cheques through its NCHL-ECC system and has processed more than 1.1 million cheques by the end of Kartik (mid-November) at an average of 8,108 cheques per day.

New cheque standards

The central bank has introduced Cheque Standards and Specifications guidelines to bring uniformity in cheques issued by the banks and financial institutions.
For electronic cheque clearance system to work effectively, cheques issued by different banks and financial institutions need to be uniform.
And the central bank has amended the cheque specifications to suit electronic cheque clearance (ECC).
Nepal Clearing House Ltd (NCHL) has already started operations from February, providing automated cheque clearing service which used to earlier be performed manually at the central bank. Moreover, the amended specifications will also strengthen the security features of the cheques to avoid any instances of fraud.

Membership of Nepal Clearing House Ltd (NCHL) — that has started clearing cheques electronically  — has crossed 50, with Nepal Rastra Bank, all 32 commercial banks, 11 development banks, and six finance companies as its members

The new cheques will be magnetic ink character reader (MICR) cheques with the necessary security features by the member banks and financial institutions.