Percived impacts and barriers in introducing MICR for automated cheque clearing: Bangladesh perspective

Abstract

Bangladesh Bank has installed Bangladesh Automated Clearing House (BACH) and introduced MICR cheque for automated fund transfer. The system needs only image and corresponding information of the submitted cheque leaf for fund clearing instead of the physical instrument. The ultimate goal is to simplify the remittance channel and payment system. The MICR model proposed by Bangladesh Bank requires all the participatory banks to have secured communication link with Bangladesh Bank, which most of the 1st Generation Banks cannot achieve due to their age-old offline infrastructure. As a result, the proposed model could not encompass majority of the populace in the development process, and focused on the urban people initially. The main limitation of the existing model is that it cannot handle the plain (non-MICR) image of a cheque leaf. An exploratory survey has been conducted on the existing MICR model to identify the impacts and barriers of the system, which were later analyzed for ranking and significance. The survey data analysis was also supplemented by the real-time statistics collected from Bangladesh Bank on the transaction profile of the implemented system. Some reasonable solutions to overcome the significant barriers of the existing system are suggested to develop an efficient MICR model for Bangladesh. The suggested model can handle both MICR image and plain image. The plain images from offline banks are forwarded to the ‘Point of Truncation’ via public communication backbone and converted to MICR image for presenting to BACH making the suggested model fully automated. The model was surveyed for feasibility and was found suitable for banking industries. The suggested model improves ‘economy of time’ and ‘economy of effort’. It is also economical and implementable especially for the remote branches of the 1st Generation Banks. It ensures participation of wide majority of the rural populace in the development process. The research also contributes to the body of knowledge of the envisaged e-commerce goal of Bangladesh.