How to Encash a US Dollar or a Foreign Currency Cheque?

Do you have a cheque denominated in currencies other than Indian Rupees such as Euro, Pound Sterling, US Dollar, Yen, etc? One can encash the cheque by depositing it in an Indian Bank.

However, duration for realization of cheque depends on the the country and method followed.

For realization the cheque will be sent to the country concerned for realization of proceeds. As per RBI, US Dollars (USD cheques) denominated cheques constitute a major share of foreign currency cheques deposited by customers for realisation.

Here are various ways of collecting (realising) USD denominated cheques. The collection process followed by banks (presenting banks) varies depending on the institutional arrangements put in place by them.

There are basically three types of arrangements adopted by banks:

Cash Letter Arrangement (CLA)

Cheques presented by customers are sent by the presenting banks in India to their correspondent banks (CBs) in USA for domestic clearing.

Funds are collected by the CBs and credited to the account of the presenting bank maintained in US.

Such accounts are known as NOSTRO accounts. For such cheques the duration varies 7 to 9 days after tendering of cheque to the CB.
However, one should keep in mind the cooling period based on the provisional credit will happen.

Once the cooling period is over, the customer's account with the presenting bank in India is credited.

Cooling period is the time up to which banks wait after receiving provisional credit for the amount of cheque in their Nostro account for possible return of the cheque under provisions of the laws of USA by the drawee bank, before giving credit to the customers.

Secured Collection is a facility extended by the CBs. Under this facility, the CBs provide guaranteed final credit without recourse within a confirmed time period unlike normal collection service.

Hence the collection time period is better under this facility. CBs offering this facility normally fix a cap for the amount of individual cheques collected under the arrangement.

Direct Collection Arrangement (DCA)

In this procedure, Indian banks send the cheques directly to the drawee banks in USA for collection.

Usually collection services ensure receipts of clear funds i.e., risk of return is almost eliminated.

This is the most prefeered method for high value cheques even though time consumed is more.

Final Credit Services (FCS)

The CB offering the service guarantees confirmed credit against the instrument. Under this arrangement banks receive final credit in their Nostro accounts without any recourse.

This service normally does not have any cooling period as the cooling period is factored by the CBs before releasing the clear funds.

Check-21Facility

The System has been facilitated under Check-21 Legislation. This procedure very myuch similar to CTS.

When using check 21 facility, dealings are cleared utilizing the exchange of check images from bank to bank. This proces is does not consume time.

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