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CLG Full Form

Every time you deposit a cheque to your account, you will encounter an entry in the passbook that says 'By CLG'. Browse through this article to know about CLG Full Form and the process involved, from the cheque deposit to the credit of the proceeds into your account.

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What is the Full Form of CLG?

Often you would have come across the entry 'By Clg' when reviewing your passbook entries. For example, you might not have paid much attention to the work CLG and would not have put in efforts to know the CLG Full Form. Your whole focus would be only to know if the amount of the cheque deposited in the bank for clearance has come into the account.

CLG full form is Clearing. It is a process wherein the cheque deposited by you will be sent to the bank on which it is drawn through the Clearing House and collect the money from the respective bank to credit it to your account.

What is a Clearing House, and what is its role in the Cheque Clearing Process?

When a cheque is issued to an individual, they will deposit the cheque into their bank account for clearance. The cheques have to be collected from various banks and distributed to the banks on which they are drawn to complete the clearing process.

Clearing House is a hub for receiving cheques from various banks and distributing the same to the banks on which the cheques are drawn for the collection of funds.

There are about 860 clearing houses in India, out of which 840 are managed by SBI and its associates, 14 are controlled by RBI and six are managed by Nationalised Banks. SBI and its associates and six nationalised banks manage the clearinghouses wherever RBI does not have its presence

Every bank has to be a member of the clearinghouse to facilitate relative branches to send the cheques deposited for clearing through the clearinghouse. Some sub-members are sponsored by a member bank and participate in the Clearing in the same way that the member bank does.

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All about the cheque clearance process

A cheque clearance is initiated when a customer deposits a cheque into his bank account. The various steps involved in the clearance of the cheque to get the funds credited to the customer's account is given below:

  • Structure of Clearing: The clearing structure was introduced to ease the movement of the instrument between the presenting branches and the drawee branches. The service branch in each centre represents the member bank in the clearinghouse. The service branch collects cheques from various branches and consolidates them for presenting in the clearinghouse.
  • Process of Clearing: The cheques are then sorted at the clearinghouse and presented to the drawee branches through the service branch of the respective member banks for payment. The drawee branches check for the accuracy and genuineness of the instrument. The cheques that are not accepted for payment are returned through another clearing, i.e., the Returns Clearing.
  • Funds Settlement: The following process is the settlement of funds that takes place at various levels. The consolidated amount of the cheques presented by a bank involves the amount demanded by the presenting bank from the drawee bank. Different other banks make similar demands on every other bank that is a member bank. The net settlement amount is arrived at, at the clearinghouse. It could either be a debit or a credit amount. By doing so, the interbank settlement amount is reached at.

The settlement of funds between the branches concerned and the service branch involves the transfer of funds. The clearing process is complete only when the drawee's account is debited, and the payee's account is credited. This happens only after the Returns Clearing, wherein the unpaid cheques are identified thoroughly.

  • Clearing Returns: The settlement process will be completed only when the ClearingClearing Returns or Returns ClearingClearing,, i.e., finalising the unpaid cheques. The aggregate of the clearing returns is arrived at, and the amount is debited to the presenting bank and credited to the drawee bank. The exact process is repeated in the inter-branch settlement account at the service branch. The amount credited to the customer's account on account of the cheque presented will be reversed when the cheque is returned in a CLG full form, i.e., clearing.
  • Inter-branch ClearingClearing: Cheques of different branches of the same bank, when presented for payment, need not be sent to the clearinghouse. The service branch plays the role of the settlement branch, and the cheques are sent to drawee branches for payment. At the service branch, the inter-branch settlement happens by debiting and crediting the inter-branch accounts internally.
  • Turn around Time: With the elaborate process involved, there will always be a time lag involved in settlement of funds through the clearing process. The movement of the instrument from one place to another takes time. The customer presenting the cheque has to wait till the drawee branch receives the cheque is satisfied with the accuracy and genuineness of the instrument before the payment is made. So the customer has to wait for 2 to 3 days for the credit of the amount to their bank account.

Conclusion

With this article, you are able to understand the CLG Full form and the process involved for the amount mentioned in the cheque presented to be credited to your account. You can review your passbook to confirm the credit to your account. The term 'By CLG' mentioned in the passbook denotes that the cheque sent in ClearingClearing has been passed for payment.

The normal cleaning process took about 2 to 3 days for cheque clearance. With the introduction of the Cheque Truncation System, which is an electronic mode, the clearance of cheques has become much faster.

Additional Reading: How to check free cibil score?

CLG FAQs

✅What is the time taken for clearance of a cheque deposited into my account?

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The normal clearing process took about 2 to 3 days for the amount to be credited to your account. With the introduction of the Cheque Truncation System, the time lag has reduced, and the clearance happens much faster.

✅What is CTS?

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Cheque Truncation System eliminates the physical movement of the instruments from one place to another. An electronic image of the cheques is transmitted to the paying branch through the clearinghouse. The electronic image will contain all the information like date of presentation, presenting bank and the date on the MICR band. Only in exceptional cases the physical movement of the instrument will be involved. 

✅What is the advantage of CTS over the normal clearing process?

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The following are the advantages of CTS over the normal clearing process.

  • Speeds up the clearing process to provide better service to customers.
  • The movement of instruments from one place to another is eliminated.
  • There is no risk of loss of cheques in transition. It is cost-effective and eliminates reconciliation-related issues.
  • Though real-time settlement options through RTGS, NEFT and IMPS have been introduced, the cheque is still a prominent mode of payment. With this as the reason, RBI is constantly trying to improve the efficiency of this payment mode. CTS was one such major approach

✅Which are the type of instruments accepted for CTS?

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Instruments that are CTS 2010 compliant can only be presented for clearance CTS.

✅Does the change from the normal clearing process to CTS affect the customers?

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No. The customers can continue with the same process of presenting the cheques except that they should use coloured inks that are image-friendly while filling up the cheques. Cheques with material alterations like overwriting the date, amount, etc., will not be processed through CTS.

✅What are the reasons for Returning the Cheques by paying banks?

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The reasons the cheques returned unpaid are given below:

  • Material alternations like any overwriting or corrections in the cheque.
  • The signature on the cheque varying from the signature in bank records
  • Post-dated cheques
  • Amount in words and figures different.
  • Mutilated cheque

✅What precautions should the customer and the bank take to avoid fraud?

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The following precautions should be taken to avoid fraud.

  • Should use only CTS 2010 complaint cheques which are image-friendly.
  • The customer should use only coloured inks that are image-friendly while writing the cheques.
  • It is better to use a new cheque leaf if there is any material alteration.
  • While affixing the stamp, the bank should take care that it does not mask the date, payee's name, amount or signature.
  • The bank should ensure that all the essential components in the cheque are captured clearly in the image.