CLG Full Form Explained: Demystifying Check Clearing

CLG Full Form Explained: Demystifying Check Clearing

If you've ever looked at your passbook entries after depositing a check, you may have noticed an entry that says 'By CLG'. But what does CLG actually stand for? Well, CLG stands for Clearing. This process involves sending the check you deposited to the bank on which it was drawn, through the Clearing House, in order to collect the money and credit it to your account.

The Clearing House plays a crucial role in the check clearing process. When you deposit a check into your bank account, it needs to be collected from various banks and then distributed to the banks on which the checks are drawn. The Clearing House serves as a hub for receiving these checks and ensuring they reach the right banks for fund collection.

In India, there are approximately 860 clearing houses. The State Bank of India (SBI) and its associates manage 840 of them, while 14 are controlled by the Reserve Bank of India (RBI), and six are managed by Nationalised Banks. It's important for banks to be members of a clearinghouse in order to send checks for clearing through the system.

So, how does the check clearance process actually work? Once you deposit a check, it goes through several steps to ensure the funds are credited to your account:

1. Clearing Structure: The clearing structure was introduced to make it easier for checks to move between presenting branches and drawee branches. The service branch in each center represents the member bank in the clearinghouse, collecting and consolidating checks for presentation.

2. Clearing Process: The checks are sorted at the clearinghouse and presented to the drawee branches through the service branch. The drawee branches check the accuracy and genuineness of the checks. Any checks that are not accepted for payment are returned through the Returns Clearing process.

3. Funds Settlement: The settlement of funds takes place at various levels. The presenting bank demands the amount from the drawee bank, and similar demands are made between other member banks. The net settlement amount is determined at the clearinghouse, resulting in either a debit or credit amount. The interbank settlement amount is then reached.

4. Clearing Returns: The finalization of unpaid checks occurs in the Clearing Returns process. The clearinghouse aggregates the clearing returns, debiting the presenting bank and crediting the drawee bank. This process is also repeated in the inter-branch settlement account at the service branch. If a check is returned, the amount credited to the customer's account will be reversed.

5. Inter-branch Clearing: Checks from different branches of the same bank don't need to go through the clearinghouse. The service branch serves as the settlement branch, handling the inter-branch settlement by debiting and crediting the inter-branch accounts internally.

It's important to note that the clearing process does involve some time lag. The movement of the check from one place to another takes time, and a customer may have to wait 2 to 3 days for the amount to be credited to their account.

In conclusion, understanding the CLG Full Form and the check clearing process can help you better comprehend the entries in your passbook. The term 'By CLG' simply means that the check sent for clearing has been approved for payment.

It's worth mentioning that with the introduction of the Cheque Truncation System, which is an electronic mode, the check clearing process has become faster and more efficient.

If you've ever looked at your passbook entries after depositing a check, you may have noticed an entry that says 'By CLG'. But what does CLG actually stand for? Well, CLG stands for Clearing. This process involves sending the check you deposited to the bank on which it was drawn, through the Clearing House, in order to collect the money and credit it to your account.

The Clearing House plays a crucial role in the check clearing process. When you deposit a check into your bank account, it needs to be collected from various banks and then distributed to the banks on which the checks are drawn. The Clearing House serves as a hub for receiving these checks and ensuring they reach the right banks for fund collection.

In India, there are approximately 860 clearing houses. The State Bank of India (SBI) and its associates manage 840 of them, while 14 are controlled by the Reserve Bank of India (RBI), and six are managed by Nationalised Banks. It's important for banks to be members of a clearinghouse in order to send checks for clearing through the system.

So, how does the check clearance process actually work? Once you deposit a check, it goes through several steps to ensure the funds are credited to your account:

1. Clearing Structure: The clearing structure was introduced to make it easier for checks to move between presenting branches and drawee branches. The service branch in each center represents the member bank in the clearinghouse, collecting and consolidating checks for presentation.

2. Clearing Process: The checks are sorted at the clearinghouse and presented to the drawee branches through the service branch. The drawee branches check the accuracy and genuineness of the checks. Any checks that are not accepted for payment are returned through the Returns Clearing process.

3. Funds Settlement: The settlement of funds takes place at various levels. The presenting bank demands the amount from the drawee bank, and similar demands are made between other member banks. The net settlement amount is determined at the clearinghouse, resulting in either a debit or credit amount. The interbank settlement amount is then reached.

4. Clearing Returns: The finalization of unpaid checks occurs in the Clearing Returns process. The clearinghouse aggregates the clearing returns, debiting the presenting bank and crediting the drawee bank. This process is also repeated in the inter-branch settlement account at the service branch. If a check is returned, the amount credited to the customer's account will be reversed.

5. Inter-branch Clearing: Checks from different branches of the same bank don't need to go through the clearinghouse. The service branch serves as the settlement branch, handling the inter-branch settlement by debiting and crediting the inter-branch accounts internally.

It's important to note that the clearing process does involve some time lag. The movement of the check from one place to another takes time, and a customer may have to wait 2 to 3 days for the amount to be credited to their account.

In conclusion, understanding the CLG Full Form and the check clearing process can help you better comprehend the entries in your passbook. The term 'By CLG' simply means that the check sent for clearing has been approved for payment.

It's worth mentioning that with the introduction of the Cheque Truncation System, which is an electronic mode, the check clearing process has become faster and more efficient.

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