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Clearing House Meaning in Banking Language

Very often we would have had heard that the cheque has gone for the clearing and same can be easily understood with the following illustration as elucidated below. Now all this is going to be a thing of past by virtue of CTS 2010 introduction.

Have a look at CTS 2010 e.g.

  • Suppose a party from Delhi pays you via cheque of Citibank and you have account in SBI, Mumbai. You deposit this cheque in your area’s SBI branch.
  • In a single cheque case SBI branch manager would send his Bank PO to Citibank’s office in Mumbai. He’d show the cheque, collect the cash and return to deposit the money in your account.
  • But SBI would be getting thousands of cheques everyday- some from ICICI, some from Citibank, some from axis and so on. SBI cannot send its staff to every other bank to get the cash, that’d be extremely time consuming.
  • Therefore To simplify this cheque transection process, each bank will send a representative to a central place and exchange cheques drawn on each other. This centralized place is called clearing house/processing house. Reserve bank of India is acting as clearing house. In cities where RBI’s office does not exist, usually SBI or other public sector bank acts as the clearing house.

So now get ready for a new banking experience as now CTS 2010 is going to make the things much easier for you as cheques are not going to be moved physically and one will be able to get the funds transferred may be in a matter of 24 hours. Three cheers for RBI for undertaking the revolutionary changes as it is very difficult to get all these Sahkari banks toe the line and understand the importance of faster transit as more the delay; more they earn on the cheque and this amount gets credited to bank balance sheet.

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