India amended the age-old Negotiable Instruments Act
1881 with a Negotiable Instruments Amendment Act 2002 (NIAA) which became
effective from February 6, 2003. Since then the undersigned has had several
discussions with leading Software Companies in India about the need to develop a
suitable software package.
Infosys, Polaris, I-Flex, Laser Soft , HCL,
TVS-E, TCS and Cognizant have been amongst the top companies which the
undersigned had at various times contacted during the last two years to
understand their preparedness to enter the Truncated Cheque market. However,
none of the software companies appreciated the enormity of the business
potential. Many of these IT Companies also appeared as not having a
suitable organizational structure to act on the emerging marketing
opportunities, conduct a market survey if required and arrive at a reasoned
marketing decision.
Some of the Companies had declared themselves that they were
not "Product Companies" and would undertake only projects based on some client
orders.
Thus the business opportunities presented by NIAA went
unexploited over the last two years.
Now the RBI has made a statement that they would like to
introduce the system of Truncated cheques from January 2005. A news report in ET
(Cheque
truncation Indian IT's new goldmine) which predicted a Rs
25,000 crores opportunity in Truncated cheques has suddenly become a talking
point. It is stated in the report that Infosys and Newgen are amongst the
companies scrambling for the market.
Some of the IT Companies may still think that Truncated
Cheque is a business with RBI, a Government agency and prefer to avoid such
opportunities for obvious procedural difficulties.
For the benefit of
such Companies it is time to point
out that the US law on Truncated cheques has become effective from October 28,
2004. It is difficult not to regret that if these companies had acted on the suggestions
made earlier and
started work on the Truncated Cheque Management an year back, they would
have been able to respond to the introduction of Truncated Cheques in US
through the "21st Century Act". (Also called "Check 21 Act")
The NIAA had provided for two types of Electronic Cheques
namely the Truncated Cheques to replace the clearing of cheques at the inter
bank level and the Cheques in Electronic form for customer's usage. With the
introduction of the RTGS scheme over the last few months, the back-end
electronic inter-bank fund transfer system is already in place. Hence the time
is ripe for the introduction of truncated cheques all over India.
The US system has many similarities to the Indian system
excepting for the concept of "Substituted Cheque" which is not in India. It also
has several consumer protection oriented regulations.
The Indian law also appears to be strong on the other legal
aspects of defining the presentation of truncated cheques and the protection for
the collecting and paying bankers.
It is time that the IT Companies start appreciating the
business potential arising out of the changes in the legal environment and
be alert to opportunities. Otherwise several opportunities will be lost.
Hopefully the advent of the Truncated Cheque Era will remove
the marketing complacency of the Indian IT Companies and enable them to harness
new opportunities that arise out of the Cyber Law Regime.
Naavi
November 2, 2004
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