Cash Operation

Niraj Sharma
NCC Bank

What is cash?
Cash means currency notes which
are in vogue (type) in different
denominations issued & guaranteed
by Central Bank of the country as
means of settlement of public debt.
Cash are the most liquid assets of
any possessor.

What is Cash Equivalent then?

Cash equivalents are those assets
other than currency notes which
can be easily or within very quick
and/or specified time period
converted into cash i.e. currency
notes.

How cash is generated in the

bank?
Cash is generated by deposit
transactions of the bank. It may be
Account Deposit and or other forms
of deposits as required and allowed
by banks. Withdrawal by a normal
OTC cheque may reduce the deposit
of physical cash.

Who manages such cash? And how?

In every bank, there is Cash Department managing
and handling cash items. It ensures the collection
of physical cash and arranges it properly. Then
based on the capacity of the vault (Where
physically Currency notes are reserved with proper
insurance coverage), the excess and over cash are
sent to concerned institutions responsible for such
transactions. For us Nepal Rastra Bank (NRB) is
that Institution where excess and over cash (i.e. not
unutilized cash) are dumped into our account with
NRB. Out of this dumped cash, certain
percentages are statutory requirements as a
cushion to depositors.

What is
Ratio)?

CRR

(Cash

Reserve

A prescribed percentage of physical

cash required to be maintained at
Nepal Rastra Bank (NRB) at our
account. This is a Cushion to Deposits
of the Bank. CRR is 5.5% of total
Deposits. That means if total deposit is
Rs.100, as a CRR Rs. 5.50 should be
held as Cash Reserve at NRB.

What types of balances are considered for

CRR calculation?
Only cash balance maintained with Nepal Rastra
Bank (NRB). For calculation following accounts are
considered,
-Current Account Deposits
-Normal Saving Account Deposits
-Fixed Deposit Deposits
Apart from these Other Deposits such as FCY
Deposits, Margin Accounts etc are not included in
the calculation.

What is Deposit?
It is liability of a bank received from
Customers of the Bank in agreement to
give or may not give return to the
depositors in specified intervals. Such
liabilities are in the form of Demand,
Term or Quasi term Deposits and or
others as may be agreed upon.

How the deposit liabilities are

created?
Deposit liabilities are created once the
account of a customer is opened and money
is deposited into the account by way of ,
a) Account Transfer ( Balance Transfer)
b) Physical Cash Deposit.

THE BASIC FUNCTION OF CASH

Department
The basic function of Cash Department
is receipt and payment of cash and
cash items cheques).

The summarized functions of the Cash

Section are as follows:
Deposit of cash over the counter.
Payment of cash/ cheque over the counter
Deposit of cash items (cheques) over the
counter.
Purchase and Sale of foreign currency Cash/TC
Cash give and take among Tellers/Head Teller
Cash transfer -Inter Branch and NRB
Cash vault operation.

Cash position management and

Insurance

Deposit of cash into customer's

account:
1.

2.

Get cash from the customer along with Deposit

Voucher/ Slip filled in two copies: original and
counterfoil.
Ensure that the deposit slips are filled in properly
with the following features:
The date is correct.
The account number and account name is correct.
The signature of the depositor.
The amount in words and figures tally and
denomination and summation is correct.

3.
4.

5.
6.

7.

8.
9.

Make sure both copies of the deposit slips contain the

same information.
While counting the notes, ensure that none of the
piece is mutilated, fake or unacceptable in any way to
the Bank.
Pass the entry in the computer system
Ensure that the name of the depositor mentioned in
the deposit slip tallies with the name appearing in the
systems while posting.
Mark both copies of the deposit slip with Cash
Received stamp and initial deposited amount thereon
along with your signature.
Hand over the 2nd copy of the deposit slip to the
customer.
If the amount is within the Teller's computer limits, it
will get through and if not, goes for the stack. In case
the entry is stacked, get it approved from the higher
authority.

Procedures for Cheque Encashment :

1.
2.

3.

4.

Get the Bank cheque from the customer with the

cheque presenter's endorsement.
Ensure the type of cheque, whether the check is
'bearer check' or 'order check'. If it is order-check, it
needs verification of the identity of the payee for
cash payment. if it is endorsed by the original payee
to 2nd payee and so on, endorsement of at least
final payee and the payee immediately prior to
him/her should be established. 'Crossed' or 'A/c
Payee' cheque, it cannot be encashed over the
counter.
Ensure the date is correct and its validity is correct,
the amount in word and figure is correct, check is
not over/double written, is not mutilated, not made
with more than one ink or bears any correction.
Pass the entry in computer and ensure the account
name, account number, Cheque number, amount
etc are correct.

Verify the signature and account operation instruction.

6.
Note down the denomination of cash and its summation
on the back of the cheque.
7.
Mark Pay cash or Cash Paid stamp and sign on it.
8.
Get the signature of the cheque presenter once again
on the back of the cheque to ensure the right payee and
acknowledgement of receipt of cash and pay the cash.
9.
All the cheques are valid up to 6 months unless
mentioned on it.
10. The common reasons for getting the transaction into
stack are as follows
5.

a. Out of debit amount limit

b. Insufficient available balance.
c. Account frozen
d. Incorrect check number.
e. Dormant account
f. Stop payment held etc.

Date of The Cheque i.e. banker should check whether the

cheque drawn is Stale Cheque ( i.e. a predated cheque not
presented for payment within a reasonable period after the date
of issue)
Or
Post Dated Cheque ( i.e. Cheque having date subsequent to
the date on which it is drawn)
Stale Cheque : A cheque dated 1st Baisakh, 2064 presented to
the bank on Chaitra, 2064 i.e. after six months of issue.
Post Dated Cheque: A cheque dated 2nd Baisakh, 2064
presented on 1st Baisakh, 2064 i.e. before the date of issuance.

Foreign currency Cash/TC purchase/

Deposit :

FCY Cash/TC can be purchased from Nepalese as

well as foreigners.
Get FCY Cash/TC and passport from the seller along
with the FCY encashment application form.
Ensure the FCY Cash/TC is acceptable as per NRB
regulation.
Gets a photocopy of passport evidencing foreign trip
and detail address of seller.
For FCY Cash pass entry by debiting FCY teller and
crediting NRS teller. Apply cash buying rate.

Foreign currency Cash/TC purchase/

Deposit contd.

For FCY TC, debit TC purchase a/c and credit NPR

teller a/c. Apply other instrument buying rate.
Issue Foreign Currency Encashment Receipt.
FCY cash up to USD 2000 or equivalent can be
purchased. For amount exceeding above it, consult
treasury department. Deposit of more than USD
2000.00 or equivalent at a time requires copy of
customs declaration of FCY cash entry into Nepal.
The foreigners can deposit convertible FCY cash into
their FCY accounts.

Foreign currency Cash/TC purchase/

Deposit contd.

In case of cash deposit into FCY account, take 1%

commission.
In case of TC purchase/ deposit, take 0.5%
commission.
In case of INR, 500 and 1000 denomination notes are
not allowed to purchase as per NRB regulation.

Cash give and take among Tellers/Head Teller :

The Head Teller distributes the required amount of cash to
the Tellers. The Tellers are given certain cash holding
limits during the transaction hour. If any Teller is
short/excess of cash he/she can get/give the cash from/to
the Head Teller. The Head Teller monitors and helps for
maintaining optimum level of cash with the Tellers. Any
such cash transaction between the Head Teller and the
Tellers is called 'Cash Give and Take' transaction.
Sometimes, two tellers may also Give and Take, with the
permission of the Head Teller. The 'Cash Give and Take'
transaction is recorded in the computer system through
the
Give
and
Take
module.
If cash is not balanced, the difference amount should be
booked in cash short or over with the approval of
higher authority.

Other operations Related to Cash Department

1.
2.
3.

Cash Transfer between the Branches

Cash Transfer to / from NRB
Cash Vault Operations

Cash vault

Vault key arrangement

Vault key register
Vault Log Book
Vault Balance Register/Vault Cash Book

Other Operations Related to Cash Department

1.
2.
3.

Cash Transfer between the Branches

Cash Transfer to / from NRB
Cash Vault Operations

Cash vault

Vault key arrangement

Vault key register
Vault Log Book
Vault Balance Register/Vault Cash Book

Cash Position
Cash position at any point of time is the sum of
three states of cash (Cash in vault, Cash in
Teller and Cash in transit). The balance shown
by the Computer System at any point of time
should tally with the physical balance of each
state of the cash position as mentioned above
provided all the transaction are posted and
approved in the system. The cash position at
any point of time should be within the
insurance limit.

Cash Position Insurance

For security purpose, the cash position should
have adequate insurance coverage. The amount
of insurance may differ from branch to branch.
The branches need to know their respective
insurance limits and maintain the cash
accordingly. In case, the branch has some
excess cash position than the insurance
coverage limit, additional temporary coverage
should be obtained by faxing the request of that
to the nominated insurance company with copy
to the General Administration Department,
Corporate Office.
Insurance:Cash at Vault, Teller Cash, Cash in Transit

Clearing
During the course of a business day a number
of instruments (cheque, draft etc) are deposited
with a bank for collection by its customers.
These instruments may be drawn on different
branches of various banks and a collecting
bank has to physically present the instruments
for collection to each drawee bank/branch. The
clearing system provides a convenient and well
established institutional mechanism to take
care of the problem of physical delivery of
instruments as well as funds transfer between
different banks.

Clearing
During the course of a business day a number
of instruments (cheque, draft etc) are deposited
with a bank for collection by its customers.
These instruments may be drawn on different
branches of various banks and a collecting
bank has to physically present the instruments
for collection to each drawee bank/branch. The
clearing system provides a convenient and well
established institutional mechanism to take
care of the problem of physical delivery of
instruments as well as funds transfer between
different banks.

Types of Clearing

Local Currency Clearing

Foreign Currency Clearing

Outward Clearing
Outward Clearing is the clearing of instruments
deposited by our customers. These instruments are
drawn on other banks/financial institutes in the
same locality or outstation.

Outward Clearing

The clearing process begins with the acceptance of

clearing instruments by the front desk.

The person receiving the instruments for collection should

ensure that the deposit slip is filled up properly
incorporating all details of instruments to be sent for
collection.
The receiving person in the front desk then puts the
Banks received stamp and initial on the deposit slip (on
both the Bank and Customer Copy) and the customer
copy is handed back to the customer. The received date
should be correctly ensured and affixed clearly on both the
copies of the deposit slip.

Outward Clearing contd

The details of instruments should be recorded in the

Cheque Received Register by the receiving person
and forwarded to the Clearing Unit/ Department for
further processing.
On basis of the authorized deposit slip, the
instruments are checked and punched into the
system for value date credit to individual
accounts.
Crossing stamps and endorsements should be
affixed on all instruments and cross checked before
they are dispatched for clearing/collection.

Outward Clearing contd

The instrument and deposit slip is segregated at this

stage.
The clearing summary sheet for collection to respective
banks with the number of instruments and the amount
to be claimed is generated from the system. Individual
sheets of instruments to be drawn on respective
branches of other banks are generated as well. The
clearing summary sheet and individual sheets are to be
checked again and authorized by the Desk Officer
before being finally dispatched.
The verification check list of all clearing items for credit
to respective accounts is generated and audited on
basis of the deposit slips.

Inward Clearing
Inward Clearing is the clearing of Instruments presented
by other banks through the clearing house for the debit of
our customers account.
Steps / Procedures:
Total number of instruments received and the total claim
from other banks and financial institutions should match
the total inward claim for the day. The separate claim
from banks and financial institutions should also be
ensured correct.
Clearing Department should ensure that the instruments
received for payment are in order and correct in all
aspect. Crossing and endorsements should be checked
as well.

Inward Clearing contd..

The instruments to be honored are passed for payment

as per authority delegated in the system.
The unpaid instruments are rejected to the Clearing
House by 2:30PM
Inward clearing Instruments are usually returned
because of insufficient funds or technical errors
Commission should be charged as per Banks rule for
cheques which are returned due to insufficient funds.

Modalities of the Clearing House

The clearing summary sheet of the total presentation is

presented to the Clearing House before 10:00 AM every
business day and presenting and accepting of
instruments with other relative members takes place.
The Clearing House will then prepare 1st settlement of
clearing transaction of that day and will provide a copy
of that settlement to each member bank showing the
total volume of total acceptance and total presentation
from/to each member banks (in amounts).
If any mistakes or corrections are found in the 1st
Settlement, an adjustment summary is presented to the
Clearing House within 2:00PM the same day.

Modalities of the Clearing House contd..

The instruments that are not honoured are faxed to the

Clearing House within 2:30PM the same day. The statement of
return cheques should include cheque/ draft no., amount,
name of presenting bank and name of accepting bank with the
reason for return.
On adjustment of the cheque return and adjustment summary,
the clearing house will prepare the 2 nd settlement sheet for
necessary checking or reconcile.
Once, the 2nd settlement sheet is deemed correct, the final
settlement and netting of transactions takes place.

Netting of Clearing Transactions:

A net settlement is arrived at the clearing house and the
debit or credit position of the bank is determined. These
are booked in their current accounts maintained by the
settling bank. This represents the inter- bank settlement.
The payment process is completed only when the funds
are debited from the drawer's account and credited to
The payee's account. This occurs after the completion of
the return clearing.

Netting of Clearing Transactions:

Total outward clearing cheques presented = xxxxx
Less: return outward clearing cheques
= xxxxx
Net receivable
= xxxxx

Total inward clearing cheques received

Less: return inward clearing cheques
Net payable
= xxxxx
Netting of Clearing Transaction

= xxxxx
= xxxxx

= (-) Payable / (+) Receivable

Regularisation of Clearing Proceeds:

The outward clearing is regularized at the end of day

in the system and the proceeds of collection realized
to individual accounts after adjusting the returned
cheques. The cheque receivable and cheque sent for
collection accounts should be zero at the end of the
day. The corresponding entry to NRB account should
match the advice received from the Clearing House.
Any difference should be immediately informed to the
Clearing In-charge /Branch Manager.

Regularisation of Clearing Proceeds:

The outward clearing is regularized at the end of day

in the system and the proceeds of collection realized
to individual accounts after adjusting the returned
cheques. The cheque receivable and cheque sent for
collection accounts should be zero at the end of the
day. The corresponding entry to NRB account should
match the advice received from the Clearing House.
Any difference should be immediately informed to the
Clearing In-charge /Branch Manager.

Thank You