What changed
Previously, banks had to individually settle compensation payable/receivable with other banks. Now, Clearing Houses/Processing Centres will calculate and settle these charges using multilateral netting, including service tax on gross obligations. The arrangement will be reviewed after three months.
What it means for you
This centralisation reduces operational burden on banks by automating inter-bank charge settlements through Clearing Houses. Banks must ensure their systems align with the new process and use MIS reports for service tax remittance. It streamlines reconciliation but requires software updates.
What you must do
- Advise your Clearing House/Processing Centre to implement necessary systems for multilateral netting of charges.
- Ensure your bank's software is updated to support the revised settlement process.
- Use the MIS reports provided to accurately remit service tax on gross obligations to the government.
- Confirm receipt of this circular and report action taken to RBI.
Who it affects
Member banks participating in NEFT, NECS, RECS, and ECS, Clearing Houses and Processing Centres, Bank IT and operations teams handling payment systems
What is the key change in this circular?
Clearing Houses/Processing Centres will now calculate and settle inter-bank processing charges using multilateral netting, instead of individual banks handling settlements.
How is service tax handled under the new arrangement?
Service tax is calculated on gross obligations of banks, and MIS reports are provided to help banks remit the tax to the government.
When will this arrangement be reviewed?
The arrangement will be reviewed after a period of three months from the circular's date.