Chapter 11- Inter-bank TT-Settlement of Inter-bank TTs and
Despatch
Preamble (Old RULE 5 reproduced)
In view of the importance of this Rule to toning up accounting
accuracy and ‘nostro’ reconciliation systems in banks, Reserve Bank of India
have, whilst giving approval to the amended version of FEDAI Rule 5 made the
following observations:-
- Dealing in the interbank market is generally for large value items and it is
in the interest of the banking system that claims are made promptly, if funds
are not received in time, and settlements effected. International banking
situation is presently not in good shape and every care must be taken by member
banks to keep their monitoring system for execution of contracts and for
watching receipts of countervalue funds in top gear. It is therefore absolutely
necessary for banks to reconcile all dealing items and other large value items
within a period of 24/48 hours by demanding cable/ telex confirmation regarding
receipt of expected credits in ‘nostro’ accounts from the correspondents
maintaining those accounts but in any event not later than a maximum period of
15 days. In this context you would observe from amendment proposed to Rule
5(III) (D) that FEDAI itself has recognized 5 calendar days as adequate period
for identifying and settling interest claims. Banks should not lose sight of the
credit risk aspects emphasized in para 3.1.3 of the Confidential booklet
“Guidelines for Internal Control over Foreign Exchange Business”. The requisite
monitoring system therefore applies for not only dealings with overseas banks
but also to banks in India whose correspondent banking arrangements are varied.
- As regards Rule 5(III) (B) & (C) it is very necessary that discrepant/
default items should be quickly identified and effectively settled between
member banks within a reasonable time. This is considered necessary also for
toning up the reconciliation system in member banks. Notices of non-receipt of
funds in the ‘nostro’ account must be followed up by cable or telex with their
correspondents. Banks should not wait for receipt of statements of ‘nostro’
accounts for reconciliation of such items because in that event corrective
action will take a much longer time. Reconciliation may be treated as a final
cross check and not a primary investigation step.
- As opposed to virtually compulsory settlement of interest claims by the
method of back valuation the buyer bank has been given the option of acceptance
of back valued credits vide Rule 5 (III) (D).
- All kinds of defaults in the delivery of countervalue currencies in cross
currency deals i.e. dealing in a foreign currency against another foreign
currency between Authorised Dealers in India, fall within the ambit of the
provisions of Rule 5, thus, making redundant a separate sub-rule for that
purpose.
- As regards Rule 5 (VI) the emphasis shall be that bank is should make proper
enquiries into their books before meeting interest claims thereby resulting in
the toning up of general efficiency in banks.
- The attention of Authorised Dealers is invited in this connection to Reserve
Bank of India Circular No. ECS 113/(Gen)-83/84 dated 25th July 1983 issued to
the Chairmen/ Chief Executives of Authorised Dealers earlier.