Computerization of Clearing of Cheques :

Over the years Reserve Bank of India as a facilitator has been playing a vital role in the implementation of innovative systems, to enable banks not only to function effectively but also to offer better customer service. RBI is in charge of the clearing house and clearing operations. It has always taken lead to introduce new systems to speed up clearing process as well to reduce the turnaround time in clearance of funds. Computerization of clearing operations was the first major step initiated by RBI, over the years RBI has been upgrading the system with new changes. To overcome the increasing volume of cheques through the clearing mechanism, RBI has fully automated the clearing house operations. This is based on the Magnetic Ink Character Recognition technology; RBI upgraded the clearing functions with new set of MICR cheques. Under this new system, cheques should have MICR code consisting of 9 digits. Each cheque would have the unique 9 digit MICR code along with the cheque number.

MICR code consists of 9 digits as:

– First three digits indicates CITY {identical to the first three digit of the postal pin code of the CITY (For example: in case of Mumbai, it would be 400)}

– Next three digits represents the Bank and each bank has been given a three digit code called bank code

– Last three digits denote the branch code

Under this MICR system the computer program would read and sort out the cheques based on the codes, thereby, in quick turnaround time, the system is able to handle volume.