Move aimed at speeding up process, checking corruption in funds’ transfer.

The Union finance ministry has told all state-owned banks and financial institutions to make payments only electronically from next month.

The move is aimed at checking corruption in transfer of funds through cheques and making the entire process transparent and faster. In a circular to all 35 state-run banks and financial institutions, the ministry said they must not make any payment through cheques from September 1.

The ministry is in touch with insurance companies as well, to extend the scope of e-payment to all their payees.

As part of its e-governance initiative, the ministry says it has asked these bodies to go for paperless fund transfer so that irregularities in payments through cheques to various parties, such as employees, vendors, customers and social sector schemes can be checked.

“Disbursal of funds through cheques often gives rise to corruption and the payment to the beneficiary is delayed. There have been instances where a cheque is not issued on time or the payment has not reached the beneficiary. E-payment will address all those issues,” said a ministry official.

However, for people who do not have a bank account, banks will still be required to make payments through modes other than electronic.

Some bank executives expressed apprehension. They said most banks were already using e-payment wherever possible, but in a few cases it was not possible to do so.

Both ministry officials and bank executives agreed mandatory electronic transfers would minimise corrupt practices, as money would be passed without any human intervention. There will be no middlemen and no pilferage in the process of sending the money to the actual beneficiary. Discontinuation of the use of cheques would be economical as well for banks, since it would reduce paper cost.

“E-payment will be good for both the beneficiary and the remitter. It will ensure smooth and speedier flow of money. At Punjab National Bank, we are already using this for all kinds of payments,” said the bank’s chairman and managing director, K R Kamath.

Punjab & Sind Bank executive director P K Anand said the use of technology in disbursal of payments would bring better transparency and efficiency into the system.