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Monday , December 24 , 2012
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Cheque this out

If you are looking to write a cheque or planning to encash from April 1, 2013, make sure your cheque complies with the Reserve Bank’s Cheque Truncation System (CTS) 2010 standards.

The apex bank had earlier set December 31, 2012, as the deadline for the implementation of the new cheque standards across all banks and NBFCs. However, through a circular issued on December 14, it extended the deadline to March 31, 2013, following requests from banks and NBFCs.

The RBI said non-CTS 2010 standard cheques would continue to be accepted by the clearing houses, “but will be cleared at less frequent interval” and the modalities and charges (if any) were being discussed with the stakeholders.

According to the Indian Banks’ Association, the shift to a new system of clearing cheques will help to reduce transaction time and incidence of fraud, besides saving manpower and cost.

It’s different

To understand the new CTS system, one must first look at the existing process of cheque transaction. At present, any person or institution can present a cheque to the collecting bank, which then sends the cheque to a clearing house for onward transmission to the paying bank. The entire process involves physical movement of cheques and could take three days or more.

Under the CTS system, the collecting bank will capture images of the cheques by scanning them. The electronic images of the cheques along with the MICR (magnetic ink character recognition) data and relevant information (date and name of the bank) will be sent to the clearing houses which will process and transmit them to the paying bank.

Since the entire process involves secured digital transmission of data, it will significantly reduce the processing time. According to senior bank officials, cheques could be cleared within a single day. The new system will also eliminate the need of manpower to physically transfer the cheques and reduce the possibilities of loss in transit.

The RBI has also mandated the use of image quality assessment to maintain the quality of the scanned images at every point of the cheques’ movement in the CTS cycle.

Spot the changes

There are a few visible changes in the cheques, besides some invisible ones.

As a customer, you must first look at the visible changes to identify the CTS cheques. A void pantograph (a wave-like design) is embossed on the left hand side of the cheque (just below where the account number is mentioned), while the space for signature is mentioned on the right hand side bottom as “Please sign above”.

Besides, the new rupee symbol will replace the earlier Rs sign where the amount in figures needs to be written, while cheque printer details along with CTS-2010 is printed on the left hand side of the leaf close to the perforation.

CTS cheques will also carry a watermark with the words “CTS India” that will be visible when held against a light source. The bank logo will be printed in ultraviolet ink to establish the genuineness of the cheque.

Time to switch

Customers should apply for new cheque books before the April deadline. Banks have already started making the necessary arrangements to provide customers with new cheque books.

“Customers have to be alert and ensure they have the proper cheque book,” said A.M. Pedgaonkar, senior adviser, banking technology, of the Indian Banks’ Association.

The CTS system was launched in New Delhi (February 2008 ) and Chennai (September 2011) and was later expanded to other regions. From April 2013, all banks have to ensure the withdrawal of non-CTS 2010 standard cheques.

Private bankers such as ICICI Bank and HDFC Bank had started issuing CTS-2010 compliant cheque books since last year as also public bankers such as the State Bank of India, Allahabad Bank and United Bank of India.

While many customers have received new cheque books, many are yet to get them.

With the system being made mandatory from next year, banks are looking to be proactive towards making customers aware of the deadline.

“The bank has already created awareness among customers by putting up notices in the branches and a notification on the website. This exercise will continue in the coming months through emails and messages on the call centre IVR (interactive voice response). ICICI Bank has also requested the customers to surrender their old cheque books at the branches and request for new CTS-2010 standard cheque books,” an ICICI Bank spokesperson said.

“We have sent notifications to our customers through mail, web portal as well as put up notices at our branches to inform customers about the deadline and request them to surrender their old cheques. We have also asked the branches to stack up new CTS-2010 chequebooks,” said a senior official at Allahabad Bank.

Keep in mind

Banks are also looking to reach out to customers who have issued post-dated cheques for EMI payments on home and auto loans to issue fresh CTS-compliant cheuqes.

However, to avoid hassles, it is better to shift to the electronic clearing system where the EMI will be directly debited from your account every month.

“Majority of the customers, who have taken loans from us, have availed themselves of the auto debit or ECS facility and, hence, will be unaffected by this change. For the rest of the customers, whose repayments are through cheques, the bank has sent written communication to all of them and requested them to come to our asset servicing branches to replace their old cheques with new ones,” an ICICI Bank official said.

You also must not forget to encash any non-compliant cheques that you have received before March rather than risking its dishonour which may lead to legal hassles.

You also have to exercise caution while writing CTS cheques. Material alterations in crucial fields such as the payee’s name and amount in figures or words are not allowed in CTS cheques.

In the case of errors, a new cheque has to be drawn even if the drawer authenticates it using full signature.