Inward and Outward Clearing Services

The security related to imaging and creating the electronic cheque needed to be defined and the cheque clearing process adjusted to accommodate electronic cheques.

Banks and financial institutions use cheque truncation systems (CTS) to manage this process. These systems have to deal with two main processes, outward clearing and inward clearing.

In outward clearing, the deposited items are scanned and the operator performs amount entry, account entry, item verification, balancing and bundling of the items at the branch level. The items are then sent to a service branch.

In inward clearing, the items received from branches are processed in the service branch where the operator performs amount entry, account entry, item verification, balancing and bundling of the items.

In India the clearing system is local and confined to a defined jurisdiction covering all the banks and branches situated in the area under a particular zone. The clearing house is a voluntary association of banks where the settlement accounts are maintained. Wherever RBI has its office the clearing house is managed by it. In the absence of an office of RBI the clearing house is managed by the SBI, Its associate banks and in few cases by public sector banks. The following are the various processes used by the bank for clearing:

Outward clearing: Cheques deposited by the customers sent for clearing to the respective banks is called outward clearing.

Inward clearing: Cheques received by the branch from various banks for debiting their customers’ accounts of the branch is called inward clearing

Outward return: Cheques which were sent in outward clearing returned unpaid, received by the branch along with the inward clearing

Inward clearing return: Cheques which are returned by the branch for various reasons from the inward cheques received by the branch.