Cross Clearing: Definition, Purpose, and Types of Customers

Cross Clearing – The term cross clearing may be familiar to some people. Some have heard directly from people who speak or read on social media.

In general, cross clearing is a check withdrawal by means of clearing when the withdrawing party will receive another bank check deposited through clearing on the same day. However, there are several provisions that state that cross-clearing is prohibited.

In order to understand more about the ins and outs of cross-clearing, see the explanation in the following article, come on!

Definition of Cross Clearing

If you look at the definition of cross clearing from the Big Indonesian Dictionary (KBBI), cross clearing can be interpreted as an activity of withdrawing checks through clearing at the cost of funds that are expected to be received through clearing on the same day.

In addition, clearing is also a financial trade settlement procedure in the form of correct and timely transfer of funds to sellers and securities to buyers. The aim is to facilitate transactions and guarantee security in the form of demand deposits.

Cross clearing can also be interpreted as a credit facility for customers in the form of checks or bank giro slips. This generally occurs because when clearing items are deposited, the funds are still not effective. However, the customer has withdrawn funds, causing an overdraft risk .

Purpose of Cross Clearing

In addition, cross-clearing itself has a purpose for several parties, for example, namely to facilitate transactions and guarantee the security of these transactions, thus facilitating transactions in the form of demand deposits.

Another goal is as follows.

  • For central banks, cross-clearing can make it easier to find out the financial situation of a bank or transactions that occur in the community.
  • For banks, cross-clearing is a form of profitable service, both for the public and for the bank itself.
  • For the public, cross-clearing provides a safe and effective payment alternative.

Types of Customers Participating in Cross Clearing

There are 2 types of customers in the cross clearing system, namely:

1. Direct Customer

This type of customer is a customer who has been registered as a clearing participant, so that he or she can calculate the letter or note directly. It can be through Bank Indonesia or PT Trans Warkat as the intermediary.

2. Indirect Customers

Indirect customers are customers who have not been registered as clearing customers. However, these customers can still take part in various clearing activities through registered banks.

Cross Clearing System Applicable in Indonesia

In Indonesia alone, there are 2 clearing systems in effect, namely:

1. Manual System

Clearing using a manual system means that each customer clears manually, both in making clearing balance slips or selecting documents.

2. Semi Automation System

In this system, the implementation has been carried out automatically, such as calculating and making card balances.

What is Clearing?

In Indonesia, the clearing institution is Bank Indonesia (BI) which is officially referred to as the National Clearing Operator (PKN). In areas where there is no BI representative, clearing is carried out by Local Clearing Operators (PKL), namely banks that have obtained approval from BI as clearing operators.

Based on Bank Indonesia Regulation No.7/18/PBI/2005 dated July 22, 2005, clearing is the exchange of electronic financial documents or data between banks on behalf of both the bank and the customer whose calculation results are completed at a certain time.

In the past, resolving interbank accounts payable cases required a lot of money and also took a long time, for example because they were not located in the same area. That’s why the idea emerged to create a clearing house.

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A clearing house is an organization whose job is to organize and determine various ways of settling these debts, from the time of the meeting between banks, the place of transaction, the amount of funds needed, and so on. The hope, of course, is for smoother payments and for the economy to move in a positive direction.

Then, what is the meaning of clearing itself? Clearing is a term in the world of banking and finance that refers to various activities that take place from the moment an agreement is made for a transaction until the end of the agreement.

However, the transaction in question is not just any transaction. It is called clearing only if the transaction involves demand deposits.

As BI defines, clearing is “the exchange of electronic financial documents or data (DKE) between clearing participants, both on behalf of the participants and on behalf of the participating customers whose calculations are completed at a certain time.”

Items that can be cleared are giro slips, checks, bank drafts for transfers, transfer receipts, debit notes, and credit notes. While DKE is fund transfer data in electronic format. As for what is meant as a participant is a bank.

Thus, it can also be said that the clearing house was created with the aim of increasing demand deposits and this is reasonable considering the dangers of transactions, especially those with large values, if only by relying on currency (paper and metal).

In simple terms, this clearing can be referred to as a transfer process. However, different from transfers which are usually made through ATM machines, the transfer process through clearing takes a long time, generally within 2-3 days. This is because the sending bank must first deposit funds with Bank Indonesia (BI).

Because clearing is a payment process using a mediator, the bank is required to maintain a number of balances in the form of a checking account with BI. The goal is to accommodate all deposits and withdrawals. Each transaction will result in an increase or decrease in the current account balance.

After that, then BI will send the balance to the receiving bank. However, the existence of this clearing is very important, especially for the world of trade. Krilling provides wider accommodations for customers, both individuals and companies, to be able to make large transactions, even up to IDR 99,999,999 per day.

Types of Clearing

Furthermore, in terms of its type, clearing has three types, namely:

1. General Clearing

This type of clearing is generally used to calculate bank notes. Meanwhile, the regulation of the system or the implementation process is directly supervised by Bank Indonesia, which is the party with the authority.

2. Local Clearing

Local clearing is a tool for calculating paperwork that is carried out between banks, but the provisions are still regulated by the region that has been previously determined.

3. Inter-Branch Clearing

This clearing is a way of transferring money or a means of calculating securities debts that are specifically made for banks which are generally located in a certain area. The method of implementation is to collect all calculations from a branch office.

Clearing System

Meanwhile, the implementation of the Bank Indonesia National Clearing System (SKNBI) consists of 2 types, namely:

1. Debit Clearing

This clearing is used for debit transfer purposes. The debit transfer originates from clearing or debit items, which include:

  • Debit notes issued by customers registered in the clearing area.
  • Debit items in the form of demand deposits and inter-regional checks.

2, Credit Clearing

Credit clearing is a credit transfer activity carried out nationally with the following conditions:

  • Transfers that can be cleared are only credit transfers originating from customers in a clearing area with destinations for other customers throughout Indonesia.
  • The credit transfer referred to above is cleared in the form of Credit Electronic Financial Data (DKE) in rupiah.
  • Credit clearing calculations are carried out directly nationally by the National Clearing Operator (PKN).
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Clearing Example

Well, then what are the examples of this clearing? Here are some of them:

  1. Check
  2. Transfer form
  3. Debit note
  4. Credit note
  5. Bank money order for transfer (WBUT)
  6. Transfer receipt proof letter (SBPT)
  7. Other debit documents approved by BI

However, it should be noted that in its regulations, debit notes must be stated in Rupiah. In addition, delivery to Local Clearing Operators (BI work units or work units at bank offices) must be accompanied by clearing documents, the terms and types of which are regulated in a Bank Indonesia Circular Letter.

Clearing Mechanism

Initially, clearing was carried out manually. But of course over time it is considered ineffective and inefficient – ​​and therefore no longer relevant for discussion.

Clearing has now been carried out by utilizing technology, through an infrastructure called the Bank Indonesia National Clearing System (SKNBI), which no longer requires the physical exchange of banknotes. It is through the SKNBI that BI regulates all the main clearing provisions that adapt to changing times.

In this case, the clearing process is as follows:

  • Bank B issues a debit note and other administrative evidence and submits it to BI
  • BI will check it and forward it to Bank A
  • Bank A gives approval and validation of checks
  • BI will continue the transaction to Bank B and Bank B will also add to Y’s balance (or it can also be cash due to a check, it’s different from a giro which can only be transferred).
  • In the last process, the current account balance of Bank A at BI has decreased, while Bank B has increased.

It should be underlined that clearing is a long process. The five stages in the previous point have been simplified. In practice, this also includes activities to create EFD, provide clearing stamps, submit clearing items to street vendors, and so on.

The same thing also happens when someone sends cash using the clearing method. The clearing process occurs when he fills out a fund transfer form at the bank. The bank will then apply for EFD to the destination bank through BI. Once approved, BI will order the destination bank to add to the balance of the owner of the destination account number.

Clearing Automation

In fact, when viewed from a business perspective, knowing the detailed clearing mechanism is something that is not too urgent. Business people certainly need to know more, for example, how to send large amounts of cash through a bank or how to make demand deposits or checks and record them in the accounting system.

However, at least by studying clearing we know that this system has many weaknesses which gradually become not ideal for business.

One thing that is most obvious is that this clearing system tends to be slow. From the explanation of the previous mechanism, it can be understood that the clearing process takes up to two to three working days. There are too many procedures to go through. Another drawback of clearing is that it is time consuming. Whatever is chosen – script or cash – ultimately requires direct physical contact with the bank.

The solution to overcome all these deadlocks is to utilize payment software technology. In this way, it can be said that the clearing process is automated.

Then about costs. The fee for using clearing is IDR 2,900 per transaction, while others even adjust it according to the amount of funds sent (the more that are sent, the greater the administration fee).

This is a complete explanation of cross-clearing, starting from the meaning, purpose, types of customers, to the cross-clearing system that applies in Indonesia. Hopefully the information in this article can add insight to You !