Cheques are turning costly, here’s how to reduce usage

Arthashastra

The Reserve Bank of India (RBI) has put forward suggestions to ensure that the use of cheques in the banking system is reduced. This will ease the operation not only for individuals, but also for banks, as they would be able to provide better services to their customers. While introducing the concept is one thing, ensuring that this is actually put into practise by individuals is another point. Here are some ways in which individuals can prepare to reduce usage of cheques in the days ahead.

Impact of additional usage: Before going towards some measures in order to curb the usage of cheques, there is the fallout of this acts that need to be understood. RBI has suggested banks to charge their customers for cheques so that there is a monetary value attached to its usage. Some banks are already doing this so it will not be a new experience for many customers, but for others who have been accustomed to using cheques at leisure without any consideration for their numbers, this can come as a big shock. The amount that would be involved might not be very high, but it is something that will have to be considered.

Direct loan repayments: One of the areas where a lot of cheques get used up is for loan repayments. Banks often take post-dated cheques from customers, which often leads to a situation where there is a large usage of cheques, especially if there are two or three loans present, like a house, car, or a personal loan. One of the ways to reduce the cheque usage on this front is to give instructions for direct transfer of the amount each month to the bank account of the lender. This means that if a housing loan needs to be repaid at the end of every month, then there should be a direct transfer to the bank account automatically each month. This will also save work for individuals because instruction needs to be given only once and the process will happen without any manual intervention.

Phone, electricity and other payments: There are a lot of utility and phone bills that has to be paid by individuals and with multiple devices and options, there are also several cheques that are used every month. This can also be reduced by ensuring payments are made through electronic clearing system (ECS) by giving specific instructions. The other choice is to make payments online, which will involve a direct transfer from a bank account.

Normal usage: There are other situations wherein cheques have to be used for normal purposes. But, when this is the case, then a careful analysis needs to be done whether some of the payments can be reduced. This is possible if there is a direct transfer to the bank account of an individual or the entity to whom the payment is being made. For most people, this will not be a very high amount and, hence, it might not matter much, but when an effort is being made to control the overall usage, there should be effective use of all the options that are present there.

(The writer is a CA and certified financial planner)

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