NO MORE CHEQUES; BANKS MUST PAY VENDORS ONLINE

To give e-payments a big push, the Finance Ministry has directed all banks to pay vendors through online fund transfers.

“We have been directed to shift to the RTGS/NEFT payments. And the Finance Ministry also wants us to take it up with our customers that we put in a condition that over time, these vendors will shift payment to their suppliers to the online mode,” Ms Shubhalakshmi Panse, Executive Director, Vijaya Bank, told Business Line.

Besides, she said that banks have also been asked to ensure that the vendors' transition to e-payment happens over a period of time, failing which banks could impose a penalty, if required. However, no time-frame has been given, she added.

Bankers say that e-payments will reduce issuance of cheques, while also bringing down the cost of transactions and frauds. The entire exercise will also help banks leverage their investment in core banking solutions, “as the online transactions will ride over the CBS network,” said Ms Panse.

Mr N.S. Srinath, Executive Director, Bank of Baroda, said that since banks are the agents for RTGS/NEFT payments, “it would be difficult to drive the system towards online fund transfers if they don't take the initiative”. The Finance Ministry's directive would also help drive the ‘green' movement, as banks will now have to move away from paper-based remittances to electronic payments, he added.

Some bankers pointed out that they had moved to the e-payment system even before the directive was issued. For instance, State Bank of Travancore (SBT) had started making e-payments from the beginning of the year.

An official of SBT said that this is applicable for each and every vendor, “who should have a bank account and should mandatorily cite the specific branch IFSC code and PAN number to SBT”. Vendors, too, do not have an option but to oblige since it is a Government order, and “they have been coping,” he added.

According to Mr Ranjith Thomas, Chief Manager, Public Relations, SBT, all payments related to his department are transacted through e-payments. These include funds released for advertising in various media as also billboards, he said.

SOURCE: http://www.thehindubusinessline.com/industry-and-economy/banking/article3377449.ece