CLG full form in banking is “Clearing”. It refers to the systematic process of settling financial transactions, ensuring the secure transfer of funds from the payer’s bank to the payee’s bank. This mechanism is critical for instruments like cheques, demand drafts, and electronic transfers (NEFT, RTGS), enabling seamless interbank transactions.

Understanding CLG in Banking

Clearing (CLG) involves validating and finalizing transactions between banks. Key types include:

  1. Cheque Clearing: Physical or electronic processing of cheques. In India, the Cheque Truncation System (CTS) accelerates this by digitizing cheques, reducing processing time to T+1 (next business day).
  2. Electronic Clearing: Automated methods like ECS (Electronic Clearing Service) for bulk transactions or NECS (National Electronic Clearing Service) for recurring payments.

The process includes three stages:

  • Presentation: Submission of the instrument (e.g., cheque) to the clearinghouse.
  • Verification: Checks for authenticity, sufficiency of funds, and accuracy.
  • Settlement: Transfer of funds between banks via RBI-approved channels.

Importance of CLG

Clearing ensures transactional efficiency, minimizes fraud risks, and supports economic liquidity. The RBI mandates standardized timelines and processes to enhance reliability.

Impact on Customers

  • Faster Access: CTS enables quicker fund availability (within 24 hours for local cheques).
  • Charges: Outstation cheque clearing may incur fees (₹50–₹200 per transaction).
  • Accuracy: Errors in account details can delay settlements.

Regulatory Oversight

The RBI governs clearing through guidelines like CTS adoption and NECS implementation. It enforces transparency in charges and timelines, safeguarding customer interests.

Tips for Efficient CLG Usage

  • Use electronic modes (NEFT/IMPS) for instant settlements.
  • Ensure accurate beneficiary details to avoid rejections.
  • Track transactions via SMS/online banking for real-time updates.