RBI may make electronic clearing of dividend mandatory

January 14: The Reserve Bank of India is likely to make it mandatory for corporates to route dividend and interest payments through its e...

January 14: The Reserve Bank of India is likely to make it mandatory for corporates to route dividend and interest payments through its electronic clearing service ECS. RBI has proposed to extend ECS to 29 new centers in addition to the existing 16 centers.

RBI has introduced ECS to facilitate institutions having to make a large number of payments like dividend, interest etc. can directly deposit the amount in bank accounts of the shareholders, depositors or investors without having to issue paper warrants.

The RBI and SBI has already launched customer education campaigns to popularise ECS among the corporates and investors. State Bank, which will manage the clearing house operations in the 29 new centres, has since completed the arrangements to start ECS with effect from January, 1999.

The new centres proposed are Surat, Baroda, Rajkot, Hubli, Mangalore, Bhopal, Amritsar, Ludhiana, Shimla, Trichur, Madurai, Cochin, Coimbatore, Trichy, Siliri, Durgapur, Visakhapatnam, Vijayawada, Lucknow, Allahabad, Varnasi, Nasik, Panaji, Kolhapur, Agra, Dehradun, Ghaziabad, Faridabad and Jamshedpur.

The existing ECS centres are Ahmedabad, Bangalore, Bhubaneshwar, Chandigarh, Calcutta, Guwahati, Jaipur, Kanpur, Hyderabad, Mumbai, Nagpur, New Delhi, Patna, Thiruvananthapuram and Pune.

Corporates will be able to save on cost considerably by routing their bulk disbursements through ECS and will also be in a position to exercise better control on the procedure. Corporates8217; dependence on the at-par8217; facility of banks to disburse interest on warrants and dividends, will be reduced considerably in its earlier form following the routing of the transaction through ECS.

Bulk and repetitive payments like interest and dividend warrants are mostly paper based involving printing of warrants in costly MICR format and despatching them by post and reconciliation thereof after payment, said the release. The corporates are required to maintain an expensive administrative machinery for printing, despatch and reconciliation. There are chances of loss of instruments in transit and their fraudulent encashment in the paper mode, said an SBI press release.

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SBI had to suffer severe loss on account of fraudulent encashment of interest warrants in the CRB Finance8217;s collapse early last year. After the incident, SBI cut down on the number of branches that offer the quot;at-parquot; service as well as become more choosy in the selection of clients.