Clearing is the mutual settlement of claims among member banks for instruments like cheques drawn on one another. It involves member banks meeting at an agreed time and place to settle the net amounts payable or receivable. There are different types of clearing including counter, MICR, and cheque truncation system clearing. Clearing can also be classified as inward, inward returns, outward, and outward returns depending on whether the bank is receiving or sending instruments for collection.

2. Clearing:
 mutual settlement of claims
 among member banks
 agreed time and place
 As per instruments drawn

3. Clearing House
 The place were member banks agree to meet, through their
representatives
 net amount payable or receivable is settled through an
account kept with the controlling bank
 SBI – State Bank of India

4.  Clearing can be classified as
 Counter clearing
 Non – MICR
 Magnetic Ink Character Recognition
 Cheque Truncation System

5. Counter Clearing
 Known as manual clearing
 Directly sent to banks through courier or through bank
officials.
 Out-dated
 Co-operative Banks

6. Non – MICR

7. MICR
 Magnetic ink character recognition is a character
recognition technology used in the process of clearing
the instruments.
 MICR encoding is at the bottom of an instrument
which includes
 bank code
 bank account number
 cheque number
 amount with secret code.

8. Clearing:
 Inward
 Inward Return
 Outward
 Outward Return

9. Inward
 When a particular branch receives instruments, which
are on themselves and sent by other member bank for
collection is treated as Inward Clearing of that branch.
 This branch is known as paying branch

10. Inward Returns
 Which are presented by collecting bank to other banks
for payment but it has been returned and unpaid by
them due to specified reason through the clearing
house.
 System generated return memos

11. Outward
 When a particular branch receives instruments drawn
on the other bank within the clearing zone and sends
those instruments for collection through the clearing
arrangement is considered as Outward Clearing for
that particular branch.
 This branch is known as collecting branch.

12. Outward Returns
Instruments which are return by paying bank due to specified
reason through the clearing house.
System generated memos will be attached

13. PROCESS

16. Statement from clearing house
 Favour
 Adverse

18. CTS
 Cheque Truncation System (CTS) is a cheque clearing
system undertaken by the Reserve Bank of India (RBI)
for faster clearing of cheques.
 Same format for all banks
 Size

21. PROCESS