Till now, even though the banks used technology and reduced their cost, they never passed on the benefits to the customer. Take the case of At Par Clearing Cheque – the Core Banking System enabled the bank to clear a cheque at any place irrespective of the city where the account is held.
Before the advent of technology and Core Banking Systems, the collecting bank had to send the cheque to the issuing bank at the city where the account is held, this used to be tedious involving expense & time. However with Core Banking System, the issuer’s bank can clear the cheque at the place where it is deposited, i.e., if a person from Chennai gives a cheque to his friend which he deposited in his bank in Bangalore, the bank will send the cheque to local clearing in Bangalore itself and get the money. The issuer’s bank will charge him as saying the cheque was cleared at a place other than the issuer’s branch location. This was day-light robbery esp. given that the bank neither incurs any additional expense or risk.
RBI has finally put an end to this vide their recent order (read here). They have prohibited banks from levying any additional charges for all clearing done in local clearing. Customers will now not required to pay for anywhere clearing.