Bills for Collection and Remittance:

Definition:

One of the important functions of the Bank is to collect different types of bills including cheques, draft, payment order, dividend warrant, FDR, Sanchaya Patra, Unit Certificate, and Bonds etc. in favor of its clients. On the other hand as a Paying Banker the branch has to honor those instruments drawn on it when other banks through collection present them. Such procedure for collection of values of the instruments is called the Bills for Collection.

Inward Bills for Collection:

When instruments received from others bank for collection of the proceeds into the respective account of their customers is called the Inward Bills for Collection.

Outward Bills for Collection:

When instruments received from the customer and forwards the bill for collection of the proceeds in the customer’s account is called Outward Bills for Collection.

If the bills are documentary in both the cases, they are termed as Outward Documentary Bills for Collection (ODBC) and Inward Documentary Bills for Collection (IDBC) respectively. In order to effect the collection, the collecting bank sends the bill to its own
branch of the locality which, in turn arranges collection of the bill through Clearing house and sends Inter Branch Transaction Credit Advice (IBTCA) to the collecting bank branch.

The collecting branch on receipt of the IBTCA credits the proceeds to the respective account maintained with them. The modus operandi is vice-versa for other bank’s collection.

Remittance:

A remittance refers to money that is sent or transferred to another party. The term is derived from the word remit, which means to send back. Remittances can be sent via a wire transfer,
electronic payment system, mail transfer, Demand draft etc.
Chaques and demand draft are increasingly losing their places as instruments that are used for payments. This is because; most individuals are today making payments through RTGS
and BEFTN mechanism. These methods are faster than the traditional methods and there is also no worry of dishonor of a cheque.

Mode of Remittance:

Although Demand Draft (DD), Telegraphic Transfer (TT) and Mail Transfer are considered as mode of remittance, but with the passage of time and innovations in banking technology,
most of the banks having online banking practicing only PO/LD as mode of remittance.

However, some banks are also using Payment Order for local payments only.

Demand Draft (DD), Pay Order (PO), Pay Slip, Telegraphic transfer (TT), Mail transfer (MT) are issued by the Remittance Department. DD, TT, and MT are issued for effecting remittance from one place to another at the request of the customer.DD is required to be carried or mailed by the customer/applicant himself or herself to the destination while for MT, an MT advice is mailed to the concerned branch by the particular bank as per request of the applicant. So, it takes time to credit the amount against DD and MT to the particular account of the payee branch. Therefore, to effect remittance at the quickest possible time, TT is issued by the branch if customer agrees to that, because, the charge is higher for issuance of TT. Now a day, DD, TT and MT are issued at the request of the account holders of the particular branch only to avoid any fraudulent transaction.
For issuance of DD, TT, MT and PO applicant is required to fill up prescribed application form and is required to make payment of charges and commission as per norms.

Cheque and DD:

 The cheque is issued by the customer, whereas Demand draft is issued by the bank.

 The cheque payment is made after presenting the cheque to the bank, while in DD is given after making payment to the bank.

 A cheque can bounce due to insufficient balance. DD cannot be dishonored as the amount is paid beforehand.

 Payment of cheque can be stopped by the drawee, whereas payment cannot be stopped in DD.

 A cheque can be paid to the bearer or order. While DD is paid to a person on order.

 In cheque drawer and payee are different persons. In DD, both parties are banks.

 A cheque needs signature to transfer amount, while DD does not require signature to transfer funds. However, banks do charge certain amount depending on the amount on Demand draft. Outstation cheque are also charged.

Payment Order (PO):

A pay order is an order drawn by a bank upon itself to make payment of the amount mentioned therein to the named payee. The pay order carries the primary liability of the issuing bank for payment and must make its payment to the payee or some other person named by the payee. The pay order cannot be cancelled or its payment stopped without the consent of the beneficiary. Pay order (PO) and pay slip (PS) are normally issued by the bank
for effecting internal payment of different bills. PO is issued as a security deposit or advance deposit to be kept with different government, other departments or custom authorities
against any contract, work order or duty payment to be settled later on.

Note: An instruction circular letter of the bank regarding cash incentive assistance for inward remittances of Bangladeshi expatriates living in abroad are placed in annexure-14.

Questions and Answer Indications:

1. Define Bills for Collection. (7.1)
2. Distinguish between Inward and Outward Bills for Collection.(7.2, 7.3)
3. State different modes of remittance in brief. (7.4)
4. Define Payment Order. (7.4)