Recently banks are informing their customers that some of
the cheque book they are using now will soon need to be replaced with a new
cheque book for future use. This is due to Reserve Bank of India's initiative
to speed up the clearing process thereby enabling the customers to get early
credit of their cheques.
What is this Cheque Truncation System?
How will this benefit the customers?
What happened to the Post Dated Cheques already issued?
What will happen if the old cheque book is used after the
stipulated date?
Is there any additional charges to be paid by the customers
for obtaining the new cheque book?
RBI has clarified in their website such common doubts from
the customers. and an extract on CTS is given
below for reference:
1. What is Cheque
Truncation?
Truncation is the process of stopping the flow of the physical
cheque issued by a drawer at some point with the presenting bank en-route to
the drawee bank branch. In its place an electronic image of the cheque is
transmitted to the drawee branch by the clearing house, along with relevant
information like data on the MICR band, date of presentation, presenting bank,
etc. Cheque truncation thus obviates the need to move the physical instruments
across branches, other than in exceptional circumstances for clearing purposes.
This effectively eliminates the associated cost of movement of the physical
cheques, reduces the time required for their collection and brings elegance to
the entire activity of cheque processing.
2. Why Cheque Truncation
in India?
As explained above, Cheque Truncation speeds up the process of
collection of cheques resulting in better service to customers, reduces the
scope for clearing-related frauds or loss of instruments in transit, lowers the
cost of collection of cheques, and removes reconciliation-related and
logistics-related problems, thus benefiting the system as a whole. With the
other major products being offered in the form of RTGS and NEFT, the Reserve
Bank has created the capability to enable inter-bank and customer payments online
and in near-real time. However, as cheques are still the prominent mode of
payments in the country and Reserve Bank of India has decided to focus on
improving the efficiency of the cheque clearing cycle, offering Cheque
Truncation System (CTS) as an alternative. As highlighted earlier, CTS is a
more secure system vis-a-vis the exchange of physical documents.
In addition to operational efficiency, CTS offers several benefits
to banks and customers, including human resource rationalisation, cost effectiveness,
business process re-engineering, better service, adoption of latest technology,
etc. CTS, thus, has emerged as an important efficiency enhancement initiative
undertaken by Reserve Bank in the Payments Systems area.
3. Will there be
any change in the process for the customers?
No. There is no change in the clearing process for customers.
Customers continue to use cheques as at present, except to ensure the use of
image-friendly-coloured-inks while writing the cheques. Of course, such of
those customers, who are used to receiving the paid instruments (like
government departments) would also receive the cheque images. Cheques with
alterations in material fields (explained in detail later) are not allowed to
be processed under the CTS environment.
4. What are the
benefits of CTS to customers of banks?
The benefits from CTS could be summarized as follows –
- Shorter
clearing cycle
- Superior
verification and reconciliation process
- No
geographical restrictions as to jurisdiction
- Operational
efficiency for banks and customers alike
- Reduction
in operational risk and risks associated with paper clearing
5. What is Cheque
Standardisation and what does CTS 2010 Standard mean ?
Standardisation of cheque forms (leaves) in terms of size, MICR
band, quality of paper, etc., was one of the key factors that enabled
mechanisation of cheque processing. Over a period of time, banks have added a
variety of patterns and design of cheque forms to aid segmentation, branding,
identification, etc., as also incorporated therein a number of security
features to reduce the incidence of cheque misuse, tampering, alterations, etc.
Growing use of multi-city and payable-at-par cheques for handling of cheques at
any branches of a bank, introduction of Cheque Truncation System (CTS),
increasing popularity of Speed Clearing, etc., were a few aspects that led to
prescription of certain minimum security features in cheques printed, issued
and handled by banks and customers uniformly across the banking industry. A
Working Group was set-up by RBI for examining further standardisation of cheque
forms and enhancement of security features therein. Accordingly, certain
benchmarks towards achieving standardisation of cheques issued by banks across
the country have been prescribed like – quality of paper, watermark, bank’s
logo in invisible ink, void pantograph, etc., and standardisation of field
placements on cheques. In addition, certain desirable features have also been
suggested to be implemented by banks based on their need and risk perception.
The set of minimum security features would not only ensure
uniformity across all cheque forms issued by banks in the country but also help
presenting banks while scrutinising / recognising cheques of drawee banks in an
image-based processing scenario. The homogeneity in security features is
expected to act as a deterrent against cheque frauds, while the standardisation
of field placements on cheque forms would enable straight-through-processing by
use of optical / image character recognition technology. The benchmark
prescriptions are collectively known as "CTS-2010 standard". Indian Banks Association (IBA) and
National Payments Corporation of India (NPCI) are co-ordinating with the banks
on implementation of the new standard. Accordingly, the cheques issued are
tested and certified by NPCI and only after such certification the cheques would
be issued to the customers.
All banks providing cheque facility to their customers, have been
advised to issue only 'CTS-2010' standard cheques not later than April 1, 2012
on priority basis in northern and southern region which will be part of the
northern and southern CTS grids respectively and across the country by
September 30, 2012 through a time bound action plan.
6. What is the prescription
relating to alterations / corrections on cheque forms ?
The prescription on prohibiting alterations / corrections on
cheques has been introduced to curtail cheque frauds on account of alterations
in the various fields of cheques and to give protection to customers as well as
banks. No changes / corrections can be carried out on the cheques (other than
for date validation purposes, if required). For any change in the payee’s name,
courtesy amount (amount in figures) or legal amount (amount in words), fresh
cheque leaves should be used by customers. This would help banks in identifying
and controlling fraudulent alterations. This prohibition is applicable to
cheques cleared under the image based Cheque Truncation System (CTS) only and
is effective from December 1, 2010. It is not applicable to cheques cleared
under other clearing arrangements for the present.
7. What are the
precautions required to be taken by the banks / customers to avoid frauds
Banks / Customers should use "CTS 2010" cheques which
are not only image friendly but also have more security features. Customers may
request/insist their banks for cheque forms that are compliant with the
"CTS 2010" standard. They should preferably use dark coloured ink
while writing cheques and avoid any alterations / corrections thereon.
Preferably, a new cheque leaf may be used in the event of any alterations /
corrections as the cheque may be cleared through image based clearing system as
enumerated in 15 above. Banks should exercise care while stamping the cheque
forms, so that it does not interfere with the material portions such as date,
payee’s name, amount and signature. The use of rubber stamps, etc, should not
overshadow the clear appearance of these basic features in image. It is
necessary to ensure that all essential elements of a cheque are captured in an
image during the scanning process and banks / customers have to exercise
appropriate care in this regard.
Deadline:
Earlier it was reported that this will be effective from
01-Jan-2013 but today RBI has announced that the customers could continue to
use the existing cheque books until 31-Mar-2013 ( Refer: http://www.firstpost.com/investing/new-cheque-norms-you-can-use-your-old-cheque-books-till-march-2013-557824.html)
Sample Image of the new form of Cheque:
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