Beginning in January next year, banks check clearing will be implemented same-day instead of three, which means check issuers that have insufficient funds will no longer be given a chance to fund their accounts.

The Bangko Sentral ng Pilipinas (BSP) new overnight clearing line (OCL) policy will effectively reduce banks income from overdraft checks but they could still charge service and penalty charges for unfunded checks.

Banks slap an automatic charge of P1,200 for insufficient funds and another P1,000 for bounced checks if the check issuers fail to fund the accounts on time, given a three-day clearing schedule. Of the P1,200 charge, P1,000 is the service charge and the P200 is for the amount P40,000 or lower. Another P200 is added for an additional P40,000 and so on.

BSP Circular No. 681 or the “Revised Check Clearing and Settlement Processes” was signed by Deputy Governor Armando L. Suratos last week and it will take effect on January 1, 2011.

The revised OCL policy went through months of reviews since the banking community was waging muted protests against proposals to implement same-day check clearing.

“It will be the clients/depositors or the check issuers who will be affected by this revision,” said Bankers Association of the Philippines’ Executive Director Leonilo Coronel. “In effect it will change the culture of issuing checks,” he added.

Presently, banks checks for clearing are settled by the BSP on the same day but the system permits deferral of settlement in the clearing balances. Funds only become available for use by the depositors-payees on the third banking day if the checks are issued within Metro Manila and seven banking days for out-of-town checks.

Coronel said it will be the same for all checks whether the drawee bank is in Metro Manila or outside of the metropolis since 95 percent of all checks are cleared in Metro Manila.

“Right now check issuers are given a chance to fund insufficient accounts. With new circular, the banks will decide on the same day whether to return the checks or give an overdraft for valued clients,” explained Coronel.

The BSP wanted to eliminate the three-day float that banks have on clearing checks to reduce risks on their side.

BSP earlier commented that it will save P3 billion a year if the depositor-payees will be able to clear checks immediately.

The float allows banks to use these funds to invest in the BSP’s open market operations to earn interests.

Without the float, banks will lose the opportunity to invest in any of the BSP facility such as special deposit accounts. In the meantime depositors, who are charged fees on two occasions when checks bounced, will no longer have the chance to replenish their accounts to avoid bounced checks.