New check clearing process in Philippine banks

A few weeks ago, I issued a post-dated check (PDC) but forgot to fund it prior to deposit date. My bank, the Bank of the Philippine Islands (BPI), called me up to follow up. I then immediately made the fund transfer and the check was honored on the same day without me paying any fees.

Unfortunately, starting this year, this is not anymore possible. The Bangko Sentral ng Pilipinas (BSP) recently issued Circular No. 681 or the “Revised Check Clearing and Settlement Processes.” Taking effect on January 1, 2011, the circular basically requires check issuers to fund the check prior to issuance.

BSP Circular: Revised Check Clearing and Settlement Processes

The BSP circular requires banks to return Drawn Against Uncleared Deposit (DAUD) and Drawn Against Insufficient Funds (DAIF) checks to the Philippine Clearing House Corporation (PCHC) by 7:30am the next day.

What this means is that there’s no more window for late funding. Any unfunded check will be considered as returned or bounced checks. At the same time, a returned check will be charged a fee of Php2,000 plus Php200 for every Php40,000 fraction of the check amount per day (not sure if this is the rate of BPI or by all banks).

As for checks subject to Stop Payment Order (SPO), they can be honored as long as the check has not been deposited for clearing by the payee yet. Otherwise, they will be considered unfunded already and will be charged the corresponding fees.

The new BSP Circular simply forces us to ensure that the account is funded when issuing checks.

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