Different Cash Management Services, Fees Charged by Banks in India
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Cash management primarily means the proper collection and disbursement of funds. This is an important task because it is beneficial in maintaining the cash flows for any company. Conventionally, it was a paper-based system and entailed several risks like higher processing costs and security.
The cash management services have undergone significant changes. Banks think from the point of view of their customers and offer doorstep facilities for their customers’ benefits. Efficient services ensure effective collection and payment as well as accurate disbursals of cash.
An efficient cash management system has the following four benefits.
1. Reduces transaction time
2. Helps companies to increase their net profits
3. Decreases losses for businesses
4. Saves idle time for banking customers
Meaning of cash management system
An efficient cash management service is a process where the bank makes collections and payments on behalf of the customers. The entire procedure is quick and streamlined because of the banks’ wide network. Furthermore, the robust clearing infrastructure, specialised technology to provide timely and efficient management, and tie-ups with other banks are beneficial for customers.
Basic cash management services
• Receivables and collections management
• Advanced information technology (IT) solutions for providing customization
• Post-dated cheque management services
• Collection of cheques in bulk
• Multiple electronic funds transfer mechanisms
• Cheque purchasing facility
Management of payables
Under the cash management system, banks also offer the following payment management services.
• Refunds of investments made in Initial Public Offerings (IPOs)
• Interest and dividend warrants
• Issuance of bulk demand drafts for the bank as well as network banks
• Remote printing of various instruments like pay order or demand draft
• Writing cheques for network banks as well as home bank
Escrow services
Banks also offer escrow services for their customers. Some of these are as follows:
• Availability of escrow depository accounts facility
• Structuring transactions and deals with investment banks, clients, and lawyers
• Customised reporting and management information system (MIS) as per client requirements
• Dedicated team for completing complicated transactions, which includes legal officers and product managers
Modes of delivery
Banks provide cash management services to customers through the following two modes.
• Own personnel
The banks recruit personnel for providing these services to their customers
• Agents
Under this mode, banks outsource the services to external agents
Electronic fund transfers
• National Electronic Fund Transfer (NEFT)
Such transactions occur between the destination and transferring banks. These transfers may be done on all days except Sundays. The transactions are completed in twelve batches (between 8am and 7pm) on weekdays and six batches (between 8am and 1pm) on Saturdays.
Fees payable per transaction are as follows:
o Up to Rs. 10,000: Rs. 2.50
o Above Rs. 10,000up to Rs.1lakh: RS. 5
o Above Rs. 1 lakh up to Rs. 2 lakh
o Above Rs. 2 lakh: Rs. 25
• Real Time Gross Settlement (RTGS)
Such fund transfers are executed in real time without any waiting period. There is no limit on the amount that may be transferred through RTGS. However, users need to transfer at least INR 2 lakh (with no maximum limit) through this mode.
Fees payable per transaction are as follows:
o Above Rs. 2 lakh to Rs. 5 lakh: Rs. 25
o Over Rs. 5 lakh: Rs. 50
• Immediate Payment Services (IMPS)
Most electronic fund transfers occur through NEFT or RTGS services. However, these occur in batches, which may result in delays. To overcome this, the National Payments Corporation of India (NPCI) introduced the Immediate Payment Services (IMPS). This service is available to Indians and allows users to transfer funds through their mobile handsets. This inter-bank transfer service is available on all days for 24 hours.
Fees payable per transaction are as follows:
o Up to Rs. 1 lakh: Rs. 5
o From Rs. 1 lakh to Rs. 2 lakh: Rs. 15
Banks are focusing on providing better services to their customers. Cash management system helps customers reduce their risks and manage cash flows more accurately.
