Clearing House -Function, Procedure & Accounting

Clearing House -Function, Procedure & Accounting

Clearing House -Function, Procedure & Accounting: Clearing stands for mutual settlement of claims made in among member banks at an agreed time and place in respect of instruments drawn on each other.

Clearing House is an arrangement under which member banks agree to meet, through their representatives, at appointed time and place to deliver instruments drawn on the other and in exchange to receive instruments drawn on themselves.

Clearing House Function image

Clearing House -Function, Procedure & Accounting

The net amount payable or receivable as the case may be is settled through an account kept with the controlling bank.

Types of clearing – Outward clearing & Inward Clearing

 Types of Return – Outward Return & Inward Return

1.         Outward Clearing Process

 First Tier-                   Collecting Bank

Second Tier-              Principal/ Main Branch

Third Tier-                 Clearing House.

Procedures of Outward clearing

First Tier-       Collecting Branch

  • Instrument Received
  • Instrument Checked
  • Instrument Deposited in Second Payee’s account
  • Stamping
  • Special Crossing
  • Clearing Stamp
  • Endorsement
  • Return of counterfoil to the customer
  • Particulars entered in the Outward Clearing Register/ Computer
  • Register Balanced, Vouchers separated from the instruments
  • Voucher passing:        Sundry Assets A/C: Clearing House

Cr.       All Pay in slips/ Vouchers

  • Sorting of instruments, prepares sub & main schedule
  • Prepare House page according to main schedules
  • Tallies House page according to Outward clearing Register
  • Instruments sent to Second Tier Branch (Principal/ main Branch)
  • Voucher passed
  • For Return unpaid of Instruments

Dr.       Party A/C
Cr.       Sundry Assets A/C: Clearing House
*          Advice Received from Principal / Main Branch

Dr.       Head Office A/C
Cr.       Sundry Assets A/C: Clearing House.

Second Tier:   Principal /Main Branch

Instrument received by this Branch

Lodgment by the Branch

  • Received House pages with instruments
  • Recorded the amount in Register / Computer from the House Page
  • Prepare Bank –Branch wise main schedule
  • Prepare House Page
  • The instruments with house page & house book sent to Third Tier (Clearing House)


Third Tier:     Clearing House (Bangladesh bank/ Sonali Bank Ltd)

  • The Instruments are delivered to the respective Banks
  1. Inward Clearing

 First Tier:       Clearing House (Bangladesh bank/ Sonali Bank Ltd)

 Instruments received from other banks in the clearing house

  • The amount & number of instruments received are entered in the house book/ computer from the main schedule of respective banks
  • Instruments delivered, received and the differences are written on a figure slip provided in the clearing house

Second Tier:   Principal /Main Branch

  • Instruments with scheduled arranged branch wise
  • The amount of each schedule received entered in the house pages of the respective branches
  • The respective house pages are totaled and checked the amount with total amounts of instrument received from a bank
  • The instruments are sent to respective branches with the slip showing total amount and number of instruments.
  • The instrument sent to the branches concerned for clearance and advice are collected from them for honoured cheques

Third Tier:     Paying Branch

  • Particulars of the instruments are compared with the schedule
  • Instruments sent to the respective department for hnouring them
  • For honoured cheques pass the following vouchers:

Dr.       Party A/C

Cr.       Head office A/c

  • Dishonored cheques (if any) with reason memo and credit advice sent to the Second Tier (Principal/Main branch).


  1. Introduction:

Clearing and Collections are very important items of    bank’s business and without which we cannot think of Bank transactions effectively. All cheques, Payment Order, Demand Drafts and other credit instruments tendered for the credit of customer’s account are delivered by the depositors at the clearing and collection counter. Deposits received by post are to be sent over to the clearing and collection counter. Both Usance and Demand Bills are received at branches for collection or realization.

1.1             Clearing:

Clearing is a process of collection & payment of instruments (cheques, payment orders, drafts etc.) through inter bank settlement under the leadership of Bangladesh Bank / Sonali Bank (where branch of Bangladesh Bank is not available). Instruments of the clearing area are received by and drawn on the bank (s) (members / sub-members) for credit to/ payment from customers / bank’s accounts collection and payment of clearing instruments are done in the following manner:

1.2    Clearing House

Clearing House arrangement has been established for settlement of payment of different instruments of different Banks of City Corporation/ Municipality area branches. Bangladesh    Bank generally acts as organizer of clearing House and Sonali Bank do the job on behalf of Bangladesh Bank, where there is no Bangladesh Bank. Every local schedule bank is the member of the clearing House. The Branches of each clearing house member Bank of the locality is/are the sub-member of the House. The settlement of accounts is done by member bank on behalf of their respective bank’s sub-members.

  1. Outward Clearing

2.1     Receipt of InstrumentBy the branches:

The instrument is received duly entered in the voucher (s) pay-in-slip (F-07) duly recorded in the Subsidiary Day Book. Instruments so by the received must be generally and specially crossed.

2.2       The instrument is checked for any apparent discrepancy and is compared with the particulars noted in the pay-in-slip and its counter-foil.

2.3       In case an Order instrument, proper identification and endorsement is required. However, in case an order instrument is being deposited in second payee’s account or payee’s name on the specially crossed instrument differs slightly from that of the depositor, the instrument may be accepted only from the customers well known to the bank after obtaining a guarantee/an indemnity there against which is to be attached to the pay-in-slip.

2.4       Instrument(s) suitably discharged/endorsed/sealed/crossed is/are sent to the In-charge along with the pay-in-slip for checking and signature thereon after affixing the relative stamps on the instrument, pay-in-slip and the counterfoil. Then the instrument and pay-in-slip are detached from the counterfoil and the latter is handed over to the customer.

  1. Clearing Items:

The particulars of the instruments and the vouchers are entered in the outward Clearing Register (B-9)/ Computer.   Then get the Clearing Register/Computer entries    balanced and the vouchers separated from the instruments lodged and ensure sending of the instrument(s) to the respective Department against acknowledgement in the register.

3.1       The instruments are arranged bank-branch wise. The sub-main schedule/computer diskettes are prepared in triplicate, two copies of which are attached with the relative instruments. The grand total of the schedule is taken and agreed with that of the registers/computers total. Then the house page/computer entry is prepared in duplicate and is sent to the Principal Branch /designated Branch with the instruments for clearing purpose.

3.2      Social Investment Bank General (SIBG) A/C  (L.O/designated Branch) is  debited through inter Branch Debit Advice (IBDA) for the total amount of the instruments sent duly recorded in the IBDA issue Register (B-45) and credited to the clearing adjustment A/C. The entry is passed as under:

Dr. SIBG A/c. Principal Branch /Designated Branch
Cr.  Clearing Adjustment A/C.

3.3       The instruments along with IBDA are sent to Principal Branch /Designated   Branch. The entry relating to Clearing Adjustment A/C is reversed on receipt of clearing return from Principal Branch /Designated Branch by passing the following entry.

Dr. Clearing Adjustment A/C.
Cr. Concerned Depositor’s A/C.

In case of returns of instruments:

Dr. Clearing Adjustment A/C
Cr. Sundry Deposit A/C
Cr. SIBG A/C. Principal Branch /Designated Branch (for the return and by responding the IDBA)


  1. Receipt of  Instrument by the Principal Branch:

The instrument is received in the similar manner as explained in the earlier Para’s.

  1. The instruments with schedule/computer diskette as   received by the branch by the (Member) from the branches (Sub-members) are re-arranged bank-branch wise.

5.1  Lodgment by the Principal Branch:

The amount of the instruments received from the branches are entered in the Outward Clearing Register (B-9)/Computer and IBD as are entered in IBDA Received Register (B-45).

5.2       The Main schedule for each Bank is prepared and total amount from the respective sub-main schedule are entered thereon.

5.3       The Clearing House Book (B28)/Computer diskette is prepared in duplicate, and the total is balanced with that of the Clearing Register/Computer.

5.4      The following entries are passed while instruments are sent to Clearing House   (Bangladesh Bank) to give accounting effects:

Dr. SIBG A/C, FAD, Head Office.
Cr. Clearing Adjustment Account (Clients of members Branch)
Cr. Clearing Adjustment Account (Sub-member Branch)

  1. Clearing House at the time of placement of instruments to the house:

The instruments with schedule, Clearing House Book /Computer diskette are to be sent to the Clearing House for realization of proceeds.

6.1       Thus the instruments so far piled at Principal Branch/Designated Branch are delivered to the representative of respective banks and simultaneously receive their instruments as delivered by other banks at the Clearing House.

  1. Inward Clearing:

Clearing House   at the time of    Receipt of  Instruments from the House:                            

7.1       The instruments drawn on our bank as received from other branches in Clearing House are entered in the Clearing House Book (B-28)/Computer from the main schedule of the respective bank mentioning the amount and   number of the instruments.

7.2       The amount of instrument delivered received & the difference is written or a figure slip provided in the Clearing House and the slip is returned.

7.3       The instrument with schedules are arranged branch wise in duplicate and a copy of each Schedule is detached.

7.4       The amount of each schedule is entreated in the Clearing House Book. (B-28) of the respective branches. The respective house pages are totaled, the total of each is noted on a slip and a grand total is taken out which will agree with the total of clearing house book.

7.4.1    For total instruments received from clearing house the following entries are passed:

Dr. Sundry Depositors/PO/DD payable etc. A/Cs (Principal Branch)
Dr. SIB General A/c of the sub-members
Cr. SIB General A/c, FAD, Head Office.

(Being the amount of total instruments received from clearing house)

7.5       The instruments are sent to the respective sub-member branches along with IBDA(s) and with the slip showing total amount and number of instrument sent retaining the instrument meant for the Member Branch.

  1. The instruments are sent to the branches concerned for clearance. The Clearing House Book along with the duplicate schedules and filed.
  1. a) Particulars of the instruments are compared with the Schedule and the slip in along with IBDA and the Schedules are detached.


  1. b) Returned instruments are sent to Principal Branch/Designated Branch along with IBDA within the fixed time frame for onward submission to Bangladesh Bank Return House.
  1. c) The following entries are passed at the time of return inward:

Dr. Sundry Depositors /Clients A/C(Sub-member Branch)
Cr. Clearing Adjustment A/c

(Being the amount of instruments returned dishonor to clearing house)

  1. d)        For return outward the entries are as under:

Dr. Clearing Adjustment A/c
Cr. Sundry Depositor A/c(Member)
Cr. SIB General A/c(Principal Branch)

(Being the amount of instruments presented in the House received dishonored from Clearing House).

10.Settlement of Clearing House A/c:

The amount of instrument presented/received/returned (inward & outward)
through Clearing Account shall be settled by observing the following procedures: At the end of the day, the Clearing Adjustment Account will show a nil balance-by transferring the credit balance/debit balance to Bangladesh Bank/Sonali Bank account maintained for the purpose. For favorable/un-favorable House, the following entries are to be passed to make the Clearing Adjustment A/C balance nil.

In case of favorable House:

Dr. Bangladesh Bank/Sonali Bank A/c
Cr. Clearing Adjustment A/c

In case of un- favorable House:

Dr. Clearing Adjustment A/c
Cr. Bangladesh Bank/Sonali Bank A/c

In every case Bangladesh Bank/Sonali Bank Dr./Cr. Advices are to be verified and matched to the entries.

10.1           Every receipt/return of clearing instruments (inward & outward) must be recorded in Clearing Register (B-9)

10.2           Every out return must be recorded in Cheque Referred & Return Register (B—50). Dishonor of instruments must be under the authentication of Manager/ 2nd Officer with due intimation to the drawer.
10.3           In case of Return inward the fate of the instruments must be intimated to the depositor with/without the instruments as warrants

  1. Transfer Delivery:

 Receipt of Instrument by the branches:

11.1.1        The instruments are received from the customers/ departments & similar procedure is adopted as explained earlier in previous sections.

  • The collecting branch prepares a schedule of all the cheques drawn on the branches at Dhaka City area and debit SIBG Account Principal Branch for the entire amount. Accordingly they prepare a debit advice (IBDA) to send the same to Principal Branch for collection of the instrument under Transfer Delivery System.


  •      The instruments with schedules, advice received from the branches are
    arranged branch-wise and a main schedule is prepared to enter the same with total amount in the Outward Transfer Delivery Register (B-9).

 The amounts of advice received from the branches are also entered on the opposite page of the above noted register and the register is balanced.

  • Principal Branch, in time, debits the Transfer Delivery Adjustment Account to respond the related IBDA(s) of the respective branches. Principal Branch at the same time again debit the drawee branches by IBDA after sorting all the instrument branch-wise. Then send the instruments along with IBDA to respective branches.
  • In case of return unpaid of any instrument from any drawee branch, they send IBDA and instruments to Principal Branch again for settlement of the transfer delivery at Principal Branch.
  • The Principal Branch will further debit the Originating branch and Credit the Transfer Delivery Adjustment Account for final settlement at Principal Branch. At Present Office leads the function of Transfer Delivery activities with the branches of Dhaka City.
  • Every receipt/return of Transfer Delivery Instruments (inward & out ward) must be recorded in Transfer Delivery Register (B-9)
  1. Outward Bill for Collection (OBC):

 12.1           Collection of Outstation Cheques:

The instruments received enclosing Pay-in-slip are duly checked and compared with the particulars noted in the Pay-in-slip and its counterfoil shall be entered in the Subsidiary Day Book .

The instrument and the pay-in-slip are detached from the counterfoil and the later is handed over to the customer duly stamped and signed.

      12.2     Outward Bills for

The details of the instruments are entered in the Collection Register (B-31) and a collection number is     allotted in serial order which is also noted on the instrument and the pay-in-slip duly initialed by the authorised officer. The instrument is sent to the collecting branch under registered post/enlisted courier service through a forwarding schedule (F-13) with necessary instructions for collection and remittance of the proceeds the pay-in-slip is to be kept/preserved in the OBC outstanding file with care to guard against fraud forgery altering the Particulars of the pay-in-slip or by keeping a fake pay-in-slip in OBC file removing the original / genuine one.

  • The instrument drawn on other banks are sent to the nearest main branch of  the bank of the locality and the instruments drawn on our branch easement  direct to the respective branch.
  • At the time of sending the instrument for collection, the following contra entries are passed:

Dr. Outward Bills Lodged A/c. (OBL)

Cr. Outward Bills for Collection A/c. (OBC)

  • On receipt of the collection proceeds the following vouchers are to be passed:

(a)              Dr. Outward Bills for Collection A/c. (OBC)

Cr. Outward Bills Lodged A/c. (OBL)

(Being entry passed on……….against OBC No………now reverse    on collection / return).

  • SIBGen A/c (Collection Bank)

Cr. Clients / Depositors A/c

(Being the OBC No……..sent for collection now realized)

  • For realizing the charges/commission:

Dr. Client’s A/c
Cr. Income A/c (Commission)
Cr. Income A/c (postal charges)

  • Debit and Credit advices (F-21 & 20) are to be sent to the clients for information and necessary action.

For realizing the charges/commission

Dr. Client’s A/c
Cr. Income A/c (Commission)
Cr. Income A/c (postal charges)

(Being the amount to commission and postal charges incurred now realized)

  • The outward Bills lodged are to be balanced monthly with the figure so the outstanding OBC vouchers on the particular date.
  1. Collection of documentary bills (sight):

 13.1           The pay-in-slip duly completed is received along with the Bill of Exchange, Invoice and Railway Receipt/Steamer Receipt/Truck Receipt /Bill of Landing/Consignment Note etc.

  • The documents are checked to ensure:-
  1. Pay-in-slip and invoices are duly signed by the party and/ their authorised representative (s).
  2. The Bill of Exchange/RR/SR/TR/BL/CN are drawn/endorsed in favor of the Bank
  3. The bills are listed in a forwarding schedule in case the bills are sent to other bank.
  4. The other processes are similar to that explained in section 12.00
  1. Realisation of proceeds through advice:
  • On receipt of the related realisation advice, the following entries are passed.

(a)        Dr.       Outward Bills for Collection (OBC) A/c.
Cr.           Outward Bills Lodged (OBL) A/c.

(b)           Dr. SIBG A/c. (Branch Concerned) (Br. Advice is treated as debit voucher)
Cr.           Party’s Account
Cr.           Income Account (Postage/Telegram charges    recovered)
Cr.           Income Account (Commission)
Cr.           Income Account, (others, if any)

  • The date of payment is marked in the Register (B-31) and office copy of the schedule and pay-in-slip are to be stamped and numbered serially as per register. The voucher, pay-in-slip, schedule and the realisation advice along with the register are sent to the Officer-in-charge for checking and signature.
  • The vouchers are released and the schedule is filed in the “OBC Paid File” and the realisation advice is to be sent to Depositor/Client.
  1. Realisation of proceeds through Demand Draft(s) of other Banks (S):
  • When presented through clearing house, the following vouchers are passed
  1. a) Clearing Adjustment A/c./Cash A/c. For full amount bill. For Bank’s charges, if any, retained by the outstation  collecting agent-

Cr.           Party’s Account.
Cr.           Income Account (Postage/Telegram Charges recovered).
Cr.           Income Account (Commission on bills).

  1. b) Outward Bills for Collection (OBC).

Cr.           Outward Bills Lodged (OBL).

  1. Issuance of Reminder

If the realisation advice is not received within one week in case of cheques and two weeks in case of documentary bills or as otherwise required, reminder on standard printed form should be issued.

  1. Inward Bills for Collection (IBC)

 Collection of Cheque:

When instruments stamped, numbered in the Inward Bills for Collection Register (B-32) are received from own branches or other banks they are to be checked. For any apparent discrepancy sender to be contacted for disposal instruction.

  • The following Vouchers are also prepared and attached with the instruments:
  1. When bills are received from other branches-

Dr. Party’s A/c.
Cr. SIB General Account (Concerned Branch)

  1. When bills are received from other bank

Dr. Party’s A/c.
Cr. Demand Draft on nearest Branch.
Cr. Income Account (Postage Recovered)
Cr. Income Account (Commission on bills)

  • The Voucher schedule and instruments along with the register are to be sent to the in-charge for checking and onward placement of the said instrument/voucher to concerned department/desk for necessary action.
  • Then the schedule is filed in the IBC instrument file.


  1. Remittance Of fund to The private A/c. through IBCA.

No transfer of fund through IBCA be allowed from/to any Private Account

out obtaining Prior approval from Head Office. Remittance through IBCA(s) can only be made to the specific account number of a particular branch approved by the competent authority. Branches may remit fund to any Private A/c through. T.T/D.D even if the same is approved free of cost by the authority.




  1. Custody of Security Instruments:

All Demand Drafts and Payment Order leaves/blocks will be kept in the joint custody of the Manager and the 2nd Officer or the authorised Officer who will satisfy themselves daily that every leaf issued by them has been accounted for in chronological order. Detailed instruction regarding the custody and issue of Bank’s security instruments are laid down in Chapter-IX and these must be carefully and strictly followed:

  1. Payment Order:

All local payments, whether on behalf of the Bank or the Bank’s constituents, will be made by means of payment Orders which will be signed jointly by two authorised officers. When the Bank’s constituents request for issue of Payment Orders, they should apply for the same on the prescribed form (F-44) along with the required money (Cash/Cheque) including the Bank’s Commission and other charges. Payment Order is issued for settlement of local payment duly recorded in the Payment Order Accounts Register (B-15) /Computer. The Payment Order should be written neatly as per application form.

2.1          The signing official must see that the particular(s) of each Payment Order have been entered in Payment Orders Account Register No. B-15/Computer. Each original entry being marked off with the contra date (date of payment / cancellation) and be initialed in the Register by the official passing the Payment Order for payment. The Payment Order Accounts Register is self balancing one thus the balance in the Register/Computer must be compared daily with the Clean Cash Book and General Ledger (B-04) by a supervising official. The Payment Order Accounts Register/Computer figures(commission, other charges & amount of P.O. issued)  must be summed daily and daily figures are to be verified with the concerned figures in the Clean Cash Book and General Ledger (B-04).

2.2          The Bank’s Payment Order is an instrument which might be paid complying with following:

  1. the payee on identification,
  2. the payee’s banker who should certify that the amount has been or will be placed to the payee’s credit, or

2.3          The amount of a Payment Order in favour of a third party may be refunded to the purchaser duly released by the payee cancellation provided the original Payment Order is surrendered by him to the Bank. Cancellation
charge as per rate in force should be recovered for credit to Income Account (Commission).


The balance of the payment order A/c must be balanced at least once in a month taking outstanding items entry wise in the Balance Book (B-23). At the close of each year ending the outstanding entries in the Payment Order Register are to be carried forward to the next year. If a Payment Order is not promptly presented for payment, the person at whose instance it was issued or the remitting branch, as the case may be should be contacted and requested to arrange for its encashment at an early date. The total of the outstanding entries must be tallied by the authorised officials to balance with the balance of the accounts in the Clean Cash Book and General Ledger on the date of balancing.


4.Application Form/Issuance Of DD forms F-43.

Application for Demand Draft will be taken on prescribed.

When an application is received by letter the prescribed application forms should be filled up with the required particulars taken down from the letter and authenticated by the authorised supervising official, the letter then being carefully filed with the voucher. Reference of the letter should also be recorded in the application form.

  1. Bank’s Commission

Commission and other charges for the issuance of Demand Drafts will be
realised from purchasers at the prevailing rates of the Bank. Any change in the rates will be communicated to the branches by the Head Office through circulars from time to time.

  1. Issuance of DD Against Tendering of Cheques:

The tendering of a Cheque in favour of the Bank itself is no authority for the Bank to issue a Draft by debit to the drawer’s account. The cheque should be accompanied with an application on the prescribed form or a letter requesting the Bank to issue the required draft which should be signed by the person(s) authorised to operate the account. In case of cheques drawn on other banks, it will not be possible to verify the signatures on the application forms with those on the cheques. It follows that when two or more signatures are necessary for operations on an account, the application should ordinarily be signed by the requisite number of parties authorised to operate the account even if, it is accompanied by a cheque which is properly signed.

  • The signature and particulars of an application for a Demand Draft to be issued by debit to the applicant’s account must be carefully verified/checked and when the account is debited the letter or application should be cancelled with and Transverse Line or oblique line and “entry passed” be written thereon. The cancellation will be dated and initialed by the official signing the vouchers and the letter will be carefully filed / preserved for record/reference.


  1. 7. Procedure Of Issuance Of Demand Draft (DD)

When a draft is to be issued, the relative Application Form F-43 will be sent to the Manager or the authorised officer who after satisfying himself that the voucher(s) has/have been duly passed/entered in the Receiving Cashiers Book (B-07) in case of a cash transaction, or in Transfer Scroll (B-06) in case of a transfer transaction noting the printed number of the DD in the application form (specified space) under the initials of the issuing officials.

7.1       Drafts must be issued in chronological order free from alterations under the joint signatures of authorised officials. All details in such instruments must be clearly and neatly written in ink and the instrument is to be protector-graphed or figured by Check Writer Machine   across the face at the top with the amount payable after the words “ Not over Tk……..”. If there is no protector-graph machine or Check Writer Machine   in the branch the words “Not over Tk…..” should be written in red ink. As the names of branches are not printed on Bank’s draft forms, particular care must be taken that all drafts, before they are issued, are branded with the Branch name seal just below the name of the Bank. Any other special instruction issued by the Head Office in connection with issuance of Draft should also be carefully observed and followed.

7.2       When a Draft leaf is spoiled in preparation, the next one to be issued and the fact should be noted against the form number in the relative Register under the initial of the Manager or the authorised officer. Spoiled leaf should be cancelled by the authorised official duly authenticated and be preserved in a separate file for purpose of verification by the auditors. For further protection the space for authorized signatures must be wiped out from the leaf.

  1. Demand Draft issue Register

Bank Drafts and TT’s may be entered in a Draft/ TT issue Register (B-30). The daily total of the DD/TT’s amounts and the commission amount therefore (respective columns of the Register(s) are to be verified with the concerned figures of the Clean Cash Book and General Ledger) will be carried into the Clean Cash Book and General Ledger under “ Social Investment Bank General Account” and Income A/c :”commission” respectively. These will be checked by the Manager or the authorised Officer in the same evening or latest by the following morning and compared with the amounts carried into the Clean Cash Book which will be signed by him. The Registers will be summated and tallied with the figure that of General Ledger and closed at the end of each year.

8.1 Entry of  Particulars

Particulars of all Demand Draft, Telegraphic Transfers and Payment Orders should be entered in relative Registers before signing the instruments. The signing official must verify the orderliness of the instruments with the relative vouchers and the entries in the Registers, which will be initialed by him.

8.2 Issuance & Dispatch of Advice:

The Particulars of each draft issued will also be entered in the relative advice of drafts issued (IBCA) simultaneously with the draft and will be installed by the signing official. All draft advice (s) i.e. IBCA issued duly signed by Authorised officers of the Branch and will be sent to the drawee branches on the following day duly recorded in the IBCA issue Register (B-45). The daily total of IBCA register must be tallied / verified with the concerned figures (daily total) of the DD/TT issue Register. Similarly the TT Confirmatory Advice (IBCA) is/are to be issued/forwarded for TT’s issued.

  1. Delivery of Advices:

The Draft Advice should not ordinarily be handed over to the payee / beneficiary  but should be dispatched direct to the paying Branch.

  1. Letter of Introduction

For facilitation of encashment to payee of the Draft a Letter of Introduction is issued by the issuing Branch. In case of Draft purchased by the payee himself, who is not known to the drawee branch, the Manger may at his request issue a letter of introduction addressed to the drawee Branch attesting therein the signature of the payee and the letter may be handed over to him in a gala sealed cover marked ‘Secret’ for delivery to the Manger of the drawee Branch. Attestation of the payee’s signature must be made under joint signatures of the officials who have signed the relative drafts. On receipt of the said ‘Secret’ cover the Manager of the drawee office will examine the cover minutely and ensure that no tampering has been made in the ‘Gala Seal’ and on being fully satisfied, he will accept the identification of the payee after obtaining his fresh signature which should agree with the signature that has been attested by the issuing Branch. The drawee Branch will, however, pay the draft if the same is otherwise in order in all respects.

  1. Payment Procedure at Paying Branch with Advice:

When a Draft Advice is received, the same should be recorded in the Draft Payable Register (B-29) & IBCA Received Register and the following entries will be passed:

Dr. Social Islami Bank General (SIBG) A/c. (Issuing Branch)
Cr. Drafts Payable Account.

Before passing Cr. Entries signature on the IBCA must be verified by the Authorised Officials.

When a Draft is presented for payment, it will be recorded in the Draft Payable Register and then sent to the authorised passing officer who will see that the signature on the Draft is genuine, test number is OK and thus to confirm that the draft is in order in all respects before passing it for payment. He will put his initial against the signature and Test on the DD at the time of passing the draft and the following entries are to be passed:

Dr. Draft. Payable A/c
Cr. Client’s A/c

In such cases Draft itself will act as Draft payable Debit voucher and Draft payable Seal should be affixed on it. The contra dates of the receipt of the Draft Advice and payment of the Draft are to be marked in the Register under proper authentication. The Draft Payable Register (B-29) is a self balancing one. The balance of the account is/are to be drawn daily and verified with the Clean Cash Book and General Ledger (B-4) by the authorised officer.

  1. Ex-Advice Payment:

Extreme care must be exercised when draft is presented for payment before
the receipt of the relative advice (IBCA). Such payments may be made under the authority of the Manager/Authorised officer who will satisfy as to the identity and respectability of the presenters and also the genuineness of the signatures of the drawing officials. The question of identification in the case of cash payments will be as per letter of introduction. In the absence of such letters, identification by a party with substantial means who is well-known to the Bank would normally be acceptable.

12.1     In all such cases where a draft is paid Ex-Advice it should be made to the debit of Drafts paid Ex-Advice/Computer and the following entries are to be passed:

“Dr. Drafts paid Ex-Advice
Cr. Client’s Account”

At this stage the Drafts Paid Ex-Advice A/c will show a debit balance. Drafts paid Ex-advice seal will be affixed on the face of Draft. These entries should be reversed only on receipt of the relative draft advice as under:

Dr. SIBG A/c. (Issuing Branch)
Cr.  DD  Paid Ex-Advice.

No payment against the Draft without advice should be made if the Branch Manager/authorised officer is not fully satisfied with the genuineness of the draft and also the identification of the beneficiary.

  1. Balancing of Drafts Payable Account:

The outstanding entries of Drafts Payable A/c and Draft paid Ex-Advice A/c will be taken down and the totals thereof be agreed with the balances of the respective accounts in the Clean Cash Book and General Ledger at least once a month by a supervising official.

  1. Refund by Cancellation:

If the amount of Draft is required to be refunded by cancellation to the purchaser, the purchaser must apply in writing to the Manger along with the Draft giving reasons for the cancellation. If the Manager is satisfied about the genuineness of the application after verifying the signature on the application with the concerned application form for purchases of the draft and also about the reasons for cancellation, he will cancel the draft by writing the word ‘CANCELLED’ in bold letters in Red Ink across the face of the draft or affixing cancelled seal and attach the cancelled draft with application. Thereafter, the discharge of the purchaser must be obtained on the Revenue Stamp of appropriate value on the reverse of the draft under the words “Received payment by cancellation”. The amount of the draft will be paid by debit to the Drawee Branch through Islami Bank General Account treating the Draft as Dr. Voucher under advice (IBDA) on joint signatures of authorised officers. The IBDA shall have to be dispatched on the same day duly recorded in the Draft issue Register (B-4 30) and IBDA issue Register (B-45) and cancellation charge at the prescribed rate should be recovered for credit to Income A/c “Commission” The following entries are to be passed:

  1. Issuing Branch :

Dr. SIBG A/c. (Drawee Branch)

Cr. Cash/Purchaser A/c.

  1. Responding Branch:

Dr. Drafts Payable A/c.

Cr. SIBG A/c. (Issuing Branch)

  1. Procedure For issuance Of T.T.:

When a TT application form (F-17) is received by the authorised officer, he will confirm that the amount of TT along with commission and Telephone/Telex charges are duly received by either in Cash or transfer to debit of the client’s A/c.

The particulars of receipted voucher then will be entered into the TT Issued Register (B- 30) in chronological order. The Test No of the TT will be inserted/applied by the authorised Test  Key holders. Then the tested message will be conveyed/transmitted immediately through Telephone/Telex by the authorised officer of the branch.

The confirmatory advice (IBCA) with detail particulars of the TT shall be sent to the payee branch on the same day duly recorded in the IBCA Issued Register (B-45).

The following entries shall have to be passed:

Dr. Cash/Party’s A/c
Cr. SIBG A/c of the concerned Br. (Payee Br.)
Cr. Income A/C (Commission/Telex Charge) realised for the issued amount
Cr. Sundry deposit A/c. (VAT) which will be transferred to FAD H.O. Later on.

At the end of the day, the daily total of different columns of the TT Issued Register (B-30) are to be done and the authorised officer must see that Concerned figures are tallied / agreed with the relative figures of Clean Cash Book and General Ledger (B-04), Income Register (B-5), IBCA Register (B-45) and Daily SIBG Extract (F-35).

  1. Payment of T.T.:

When a TT message is received over Telephone/TLX the Test Number should be decoded /verified by the authorised TT Test Key holders. If agreed, it should be entered into the TT Payable Register (B-33) and the following entries are to be passed:

Dr. SIBG A/C. (Issuing Br.)
Cr. T.T. Payable A/C
Dr. T.T. Payable A/C
Cr. Client’s A/c. /T.T., PO.

The beneficiary also will be intimated accordingly regarding receipt of the T.T. After Payment the Receipt of the T.T. Confirmatory advice (IBCA), must be posted in the T.T. Payable Register duly verified the amount, date and particulars etc. If the T.T. Confirmatory advice is not received, within reasonable time, the Issuing Br / Branches are to be pursued till receipt of the Confirmatory Advice (IBCA)

If the T.T. test is not agreed or in case of other discrepancies the amount will be kept in the T.T. Payable A/C and immediately be contacted over phone followed by a letter with the issuing Branch to settle the discrepancy at the earliest.

Separate vouchers in respect of each T.T. (issue or payment) shall have to be prepared by the branch.

The daily total of T.T. Payable Register is to be done and the figures must be tallied with the relative figures of the SIBG Extract of the day.

  1. Issuance of T.T., Payment Order: (TT/PO)

When there is no account of the beneficiary with the payee branch, payment order shall have to be issued favoring beneficiary/beneficiary’s bank and to be dispatched immediately along with a forwarding letter under intimation to the Issuing Branch.

Manager/Authorized officials must ensure that all the T.T issued of the day have been dispatched/conveyed along with Confirmatory Advice on the same day to the payee branch and all the T.T. Confirmatory Advices (IBCA) for the TTs received and paid are duly entered in the TT Payable Register/IBCA Received Register.

  1. Handling of T.T. Test Keys

Test-Key Apparatus part-I & part-II should be handled cautiously and maintained jointly by the Manager and 2nd Officer/In-Charge, General Banking, so that coding/de-coding may be accurate to avoid unnecessary correspondences and in case of big Branch it may be maintained by a nominated officer having permission from FAD, Head Office.
18.1     Issuing and Receiving of T.T message should be done at least by the 2nd Officer or In-Charge, General Banking Department of the Branch.

  • In case of incorrect Test, the matter should be brought to the notice of the Manager or 2nd Officer and the same has to be taken up with the issuing Branch immediately to ensure prompt service to the customers. Issuing Branch will take up the issue on priority basis so that correct test may be conveyed to the responding Branch without delay.

18.1.1  T.T. confirmatory (IBCA) shall have to be dispatched to the concerned payee Branch (s) on the same day for issuance of the T.T(s).

  • Daily SIBG statement shall have to be dispatched latest by the following day positively for reconciliation purpose.
Clearing House -Function, Procedure & Accounting