Operational Aspects of Handling Clearing
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Principles and Practices of Banking — JAIIB.
One-liners from this chapter
Free sample — 8 of 66 rapid-fire Q&A cards.
What is a clearing house in the context of Indian banking?
A clearing house is a common facility where representatives of member banks meet to exchange cheques and other negotiable instruments drawn on each other, and settle the net amounts due between them.
What is the 'endorsement' requirement for transferring a cheque to another party?
Payee must sign on the reverse of the cheque.
Which body oversees the cheque clearing system in India?
The Reserve Bank of India (RBI) oversees and regulates the cheque clearing system in India, and operates clearing houses in major cities through its Department of Payment and Settlement Systems.
What is the maximum validity period of a cheque in India?
Three months from the date of issue.
What is the Magnetic Ink Character Recognition (MICR) code on a cheque?
MICR code is a 9-digit code printed at the bottom of a cheque using magnetic ink, encoding the city code, bank code, and branch code to enable automated sorting and processing of cheques in clearing.
What happens to a cheque presented after its validity period expires?
It is returned as a stale cheque by the bank.
What does NACH stand for and what is its purpose?
NACH stands for National Automated Clearing House; it is a centralised electronic clearing platform operated by NPCI that facilitates bulk and repetitive payment transactions like salaries, pensions, EMIs, and utility bills.
What is the purpose of crossing a cheque with two parallel lines?
To ensure payment is made only through a bank account.
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