Central Bank standardizes issuance of giro drafts

JAKARTA (JP): Bank Indonesia has standardized the issuance of bank giro, a kind of bank draft, to provide greater legal certainty to the drawer, the payee, and the banks issuing and accepting the instrument of payment.

The central bank announced over the weekend that the measure was taken to minimize the number of rejected giro drafts in the country's banking system.

Under the standardized procedures, the maturity period of the bank giro -- a payment order which automatically transfers a stipulated amount of a customer's funds to a designated third party in the same or a different bank -- is set at 70 days.

Other important aspects of the standardized procedures include the requirement imposed on the drawer to provide the required funds within six months from the issuance of the giro draft. The six-month requirement can be waived if the drawer cancels the giro immediately after the maturity period of the payment order has ended.

The request for the cancellation of the giro should be done in a written form and should be addressed to the paying banks after the maturity term has been achieved.

According to data at Bank Indonesia, more than 80 percent of the bank drafts circulating in Jakarta are issued in the form of giro.

In December 1994 alone, the clearing of bank drafts in Jakarta reached 2.93 million drafts at a total value of Rp 61.35 trillion (US$27.6 billion). Around 89 percent of the total cleared drafts were in the form of bank giro, with a total value of Rp 29.23 trillion, and the remaining 11 percent in checks.

The value of bad giros reached Rp 59 billion and that of bad checks totaled Rp 23 billion. (hen)