The Hindu 14.12.2009
New MCD system for early payments to contractors
Staff Reporter
NEW DELHI: To bring in transparency and plug loopholes in payment to contractors roped in for implementing its various projects, the Municipal Corporation of Delhi has devised a mechanism to honour payments to contractors through a new system called “Real Time Gross Settlement”.
The RTGS is a funds transfer mechanism where transfer of money takes place from one bank to another on “real time” and “gross” basis. This is the fastest possible money transfer system through the banking channel. Settlement in “real time” means payment transaction is not subjected to any waiting period. The transactions are settled as soon as they are processed and “gross” settlement means the transaction is settled on one-to-one basis without bunching with any other transaction.
Large transactions
This system is primarily for large-value transactions and will help the civic body arrest long delays caused by the present method of settling contractor payments through cheques. Under RTGS, the money would be directly transferred to the contractors’ bank account. “The present method of settling contractor payments is very tedious and time consuming. Payments are first dispatched from the MCD headquarters to its zonal offices and thereafter sent to the divisional offices which ultimately issues cheques for the requisite amount and pays them to the contractors. Resultantly, the entire process takes a lot of time but under the RTGS all the multiple layers of settling this payment will be eliminated and payments would be cleared within a matter of few hours itself,” an official said.
The civic body is already honouring salary payments to its own employees through the electronic clearance system introduced earlier. Under this system meant for bulk transactions, salaries to municipal employees are sent directly to their bank accounts through the mode of electronic funds transfer from one bank to another using the services of a clearing house.
