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US-Dollar Cheque Collection

One of the services rendered by banks as part of their normal banking operations is collection of cheques deposited by their customers, some of which, could also be drawn or payable on banks that are outside the country. Such cheques are called foreign currency cheques and, presently, a significant part of these cheques are US-Dollar denominated payable by banks in the United States of America.

In the interest of better public awareness, the following FAQs have been prepared for cheques denominated in US-Dollars.

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1. I have received a cheque denominated in US Dollars. How does such a cheque differ from the usual Rupee cheques as an instrument of payment? +

Cheques denominated in currencies other than Indian Rupees such as Euro (€), Pound Sterling (£), US Dollar ($), Yen (¥), etc., are called foreign currency cheques. Foreign currency cheques include demand drafts, personal cheques, banker’s cheques, cashier’s cheques, traveller’s cheques, etc. Since such cheques are not payable in India they are, therefore, required to be sent to the country concerned for realization of proceeds.

1. What is Cheque Truncation? +

Truncation is the process of stopping the flow of the physical cheque issued by a drawer at some point by the presenting bank en-route to the paying bank branch. In its place an electronic image of the cheque is transmitted to the paying branch through the clearing house, along with relevant information like data on the MICR band, date of presentation, presenting bank, etc. Cheque truncation thus obviates the need to move the physical instruments across bank branches, other than in exceptional circumstances for clearing purposes. This effectively eliminates the associated cost of movement of the physical cheques, reduces the time required for their collection and brings elegance to the entire activity of cheque processing.

1. Inflation Indexed Bonds (IIBs) were issued in the name of Capital Indexed Bonds (CIBs) during 1997. How is the new product of IIBs different from earlier CIBs? +

The CIBs issued in 1997 provided inflation protection only to principal and not to interest payment.
New product of IIBs will provide inflation protection to both principal and interest payments.

Q1. What is an Infrastructure Debt Fund (IDF)? +

Ans : IDFs are investment vehicles which can be sponsored by commercial banks and NBFCs in India in which domestic/offshore institutional investors, specially insurance and pension funds can invest through units and bonds issued by the IDFs. IDFs would essentially act as vehicles for refinancing existing debt of infrastructure companies, thereby creating fresh headroom for banks to lend to fresh infrastructure projects. IDF-NBFCs would take over loans extended to infrastructure projects which are created through the Public Private Partnership (PPP) route and have successfully completed one year of commercial production. Such take-over of loans from banks would be covered by a Tripartite Agreement between the IDF, Concessionaire and the Project Authority for ensuring a compulsory buyout with termination payment in the event of default in repayment by the Concessionaire.

1. Does QA 22 Account continue under Foreign Exchange Management Act, 1999? +

No. With the introduction of Foreign Exchange Management Act, 1999, the accounts opened by foreign nationals who are resident in India are treated as resident accounts. Such accounts are at par with other resident Rupee accounts.

1. Who can undertake remittance transactions between India and Singapore through the UPI-PayNow linkage? +

Account-holders of the participating banks and financial institutions in India and Singapore can do the cross-border remittance transactions through the UPI-PayNow linkage.

Government securities offer the benefit of safety, liquidity and attractive returns to investors. With the enactment of the Government Securities Act, 2006 Government securities, including the Relief/Savings Bonds issued by the Government of India, have become more investor friendly. Investors of such bonds will particularly benefit from such changes in the Act. To create public awareness in this regard and as a customer friendly measure, the following Frequently Asked Questions (FAQs) along with the answers have been released by the Reserve Bank of India (RBI).

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1. What does one mean by Government security? +

Government security (G-Sec) means a security created and issued by the Government for the purpose of raising a public loan or any other purpose as notified by the Government in the Official Gazette and having one of the following forms.

a Government Promissory Note (GPN) payable to or to the order of a certain person; or
a bearer bond payable to a bearer; or
a stock; or
a bond held in a Bond Ledger Account (BLA).

1. ಆರ್ಟಿಜಿಎಸ್ ಎಂದರೆನು?

ಉತ್ತರ. ‘ಆರ್ಜಿಎಸ್’ ಎಂಬ ಸಂಕ್ಷಿಪ್ತ ರೂಪವು ರಿಯಲ್ ಟೈಮ್ ಗ್ರಾಸ್ ಸೆಟ್ಲಮೆಂಟ್ ಅನ್ನು ಸೂಚಿಸುತ್ತದೆ, ಇದನ್ನು ಪ್ರತ್ಯೇಕವಾಗಿ ವಹಿವಾಟಿನ ಆಧಾರದ ಮೂಲಕ [ನೆಟ್ಟಿಂಗ್ ಇಲ್ಲದೇ] ಹಣವರ್ಗಾವಣೆಗಳ ನಿರಂತರ ಹಾಗೂ ರಿಯಲ್ -ಟೈಮ್ ಸೆಟ್ಲಮೆಂಟ್ ಅನ್ನು [ವಾಸ್ತವ -ಸಮಯದ- ಹಣ ಸಂದಾಯವನ್ನು] ಹೊಂದಿರುವ ವ್ಯವಸ್ಥೆಯಾಗಿ ವಿವರಿಸಬಹುದಾಗಿದೆ. ‘ರಿಯಲ್-ಟೈಮ್’ ಅಂದರೆ ಸೂಚನೆಗಳನ್ನು ಪಡೆದ ಸಮಯದಲ್ಲಿ ಪ್ರಕ್ರಿಯೆಗೊಳಿಸುವದು; ‘ಗ್ರಾಸ್ ಸೆಟ್ಲಮೆಂಟ್’ ಅಂದರೆ ಹಣ ವರ್ಗಾವಣೆ ಸೂಚನೆಗಳ ವ್ಯವಸ್ಥೆಯು ಪ್ರತ್ಯೇಕವಾಗಿ ಸಂಭವಿಸುವುದು.

1. What is TReDS ? +

Ans. TReDS is an electronic platform for facilitating the financing / discounting of trade receivables of Micro, Small and Medium Enterprises (MSMEs) through multiple financiers. These receivables can be due from corporates and other buyers, including Government Departments and Public Sector Undertakings (PSUs).

Disclaimer:

These FAQs are for general guidance purpose only. In case of any inconsistency(ies) between FAQs and FEMA, 1999 and Rules/Regulations/Directions/Permissions issued thereunder, the latter shall prevail.

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Q1. Can a resident person undertake forex transaction? +

Answer: Resident persons are permitted to undertake forex transactions only with authorised persons and for permitted purposes, in terms of the Foreign Exchange Management Act, 1999 (FEMA).

Resident persons undertaking forex transactions with unauthorised persons and for purposes other than those permitted under FEMA shall render themselves liable for penal action under the Act.

1. What is Pradhan Mantri Garib Kalyan Deposit Scheme (PMGKDS), 2016 +

Pradhan Mantri Garib Kalyan Deposit Scheme (PMGKDS), 2016 is a scheme notified by the Government of India on December 16, 2016 which is applicable to every declarant under the Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016.

1. ಪ್ರಿಪೇಯ್ಡ್ ಪೇಮೆಂಟ್ ಇನ್ಸ್ಟ್ರುಮೆಂಟ್ಗಳ [ಪಿಪಿಐಗಳು]ನೀಡಿಕೆ ಹಾಗೂ ಕಾರ್ಯಾಚರಣೆಗಳ ಕುರಿತು ರಿಸರ್ವ್ ಬ್ಯಾಂಕ್ ಆಫ್ ಇಂಡಿಯಾ [ಆರ್ಬಿಐ] ಮಾಸ್ಟರ್ ಡೈರೆಕ್ಷನ್ [ಎಮ್ಡಿ] ಅನ್ನು ಯಾವ ಅಧಿಕಾರದ ಅಡಿಯಲ್ಲಿ ನೀಡಿದೆ? +

ಉತ್ತರ. ಪಿಎಸ್ಎಸ್ ಆ್ಯಕ್ಟ್, 2007ರ ಸೆಕ್ಷನ್ 10[2]ರೊಂದಿಗೆ ಓದಿದ ಸೆಕ್ಷನ್ 18ರ ಅಡಿಯಲ್ಲಿ ನೀಡಲಾದ ಅಧಿಕಾರಗಳನ್ನು ಚಲಾಯಿಸುವಲ್ಲಿ , ಆರ್ಬಿಐ ಈ ನಿರ್ದೇಶನಗಳನ್ನು ನೀಡಿದೆ.

1. Why was the Scheme of Withdrawal of Legal Tender Character of the old Bank Notes in the denominations of ₹ 500 and ₹ 1000 introduced ? +

The incidence of fake Indian currency notes in higher denomination has increased. For ordinary persons, the fake notes look similar to genuine notes, even though no security feature has been copied. The fake notes are used for antinational and illegal activities. High denomination notes have been misused by terrorists and for hoarding black money. India remains a cash based economy hence the circulation of Fake Indian Currency Notes continues to be a menace. In order to contain the rising incidence of fake notes and black money, the scheme to withdraw legal tender character of the old Bank Notes in the denominations of ₹ 500 and ₹ 1000 was introduced.

1. When did Payment and Settlement Systems Act, 2007 (PSS Act, 2007) came into effect? +

Ans. The PSS Act, 2007 received the assent of the President on 20th December 2007 and it came into force with effect from 12th August 2008.

1. What is Sovereign Gold Bond (SGB)? Who is the issuer? +

SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The Bond is issued by Reserve Bank on behalf of Government of India.

1. What is the inflation index to which inflation rate will be linked? +

Inflation rate will be based on the final combined Consumer Price Index [(CPI) base: 2010=100].
The final combined CPI will be used as reference CPI with a lag of three months. For example, the final combined CPI for September 2013 will be used as reference CPI for whole of December 2013.

1. Query What is the definition of 'Basic Savings Bank Deposit Account' (BSBDA)?

Response

All the existing ‘No-frills’ accounts opened pursuant to guidelines issued vide circular RPCD.RF.BC.54/07.38.01/2005-06 dated December 13, 2005 and RPCD.CO.No.RRB.BC.58/ 03.05.33(F) / 2005-06 dated December 27, 2005 and converted into BSBDA in compliance with the guidelines issued in circular RPCD.CO.RRB.RCB.BC.No.24/07.38.01/2012-13 dated August 22, 2012 as well as fresh accounts opened under the said circular should be treated as BSBDA. Accounts enjoying additional facilities under the reasonable pricing structure for value added services, exclusively for BSBDA customers should not be treated as BSBDAs.

1. What is Indo-Nepal Remittance Facility Scheme under NEFT ecosystem? +

Ans: The Indo-Nepal Remittance Facility (INRF, Scheme) is a cross-border remittance scheme to transfer funds from India to Nepal (one-way only), enabled under the NEFT ecosystem. The scheme was launched by the Reserve Bank of India (RBI) in May 2008 to provide a safe and cost-efficient avenue to migrant Nepalese workers in India to remit money back to their families in Nepal.

In August 2021, the Scheme was enhanced to boost the trade payments between the two countries, and to facilitate payments relating to retirement, pension, etc., to our ex-servicemen who have settled / relocated in Nepal.

1. Query: Are banks required to obtain RBI approval to participate in the Gold Monetization Scheme, 2015?

Response: No. However, banks should submit to RBI the implementation details including names of the Collection and Purity Testing Centres (CPTCs) and refiners with whom they have entered into tripartite agreement and the branches operating the scheme. Banks should also report the amount of gold mobilised under the scheme by all branches in a consolidated manner on a monthly basis in the prescribed format.

Q 1. Whether banks can accept interest-free deposits?

Ans. Banks can accept interest free deposits only in current account in terms of paragraph 29.5 of Master Direction- Reserve Bank of India (Interest Rate on Deposits) Directions, 2025.