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Wednesday, March 12, 2014

Are your cheque leaves CTS-2010 compliant?

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What is CTS-2010 standard?


The New Year is going to witness a change in the way cheques are cleared in India. From January 1, 2013, the Cheque Truncation System (CTS) will be implemented by all banks across the country, wherein the physical movement of cheques between banks will be eliminated. This means, when you issue a cheque to someone, and this person presents the cheque in his bank, this cheque will not physically move to the drawee bank. The physical cheques are retained at the presenting bank level. Instead, an electronic image of the cheque is transmitted to the drawee branch, along with relevant key information like data on the MICR band, date of presentation, presenting bank, etc. To enable this, the Reserve Bank of India (RBI) has prescribed a set of minimum security features which need to be followed by the banks. Such benchmark prescriptions are together known as “CTS-Standard”.

Is this a new concept in India?


The CTS was implemented by the RBI in the National Capital Region in 2008 and in Chennai in 2011. Taking into account the benefits of this system to all the stakeholders, the RBI has decided to introduce this system across the country from January 2013.

How will the new cheques look like?


The CTS-compliant cheque leaves will need to have the following:
1. Bank's logo and details, printed in invisible ink
2. VOID pantograph, which is a wavelike design, below the account number
3. Cheque printer details along with ‘CTS-2010’ mentioned, positioned on the extreme left hand side of the cheque
4. Rupee symbol "`" next to where the amount in figures needs to be written
5. Signature space indicator mentioning "please sign above"  

What must you do as a customer of the bank?


As a customer, you must ensure that you use only CTS-2010 compliant cheque leaves with effect from January 1, 2013. You are not charged a fee for this. If you have ordered cheque books recently, there is a possibility that you would have received the new format cheque books. However, if you have received the cheque book before 3 or 4 months, you might have received a cheque book which is non-CTS compliant. In such a case, you must immediately surrender the non-compliant cheque book to your bank and obtain a new CTS-compliant cheque book.

Further, if you have issued a post-dated cheque to anyone, dated after January 1, 2013, or issued such non-compliant post-dated cheques for your home loan or auto loan or any other loan, then you must exchange these for CTS-compliant cheques immediately, as the old cheques may not be cleared after December 31, 2012.

You must also take great care while using CTS-2010 compliant cheques. Any alterations or corrections in crucial fields may result in the cheque not being processed under the new system. It is therefore advisable to use a new cheque leaf if you wish to change the payee’s name, amount in words or the amount in figures. It has also been advised by RBI to preferably use dark coloured ink while writing cheques.

What do you stand to gain under the new system?

As there is no physical movement of cheques, the clearing and credit to your account will be faster than before. Also, there is no risk of loss of cheque in transit. The biggest advantage is that CTS-compliant cheques are more secure than old cheques. There is a reduced scope for committing frauds due to the security checks in place. It is proposed to integrate multiple locations and reduce geographical restrictions in cheque clearing. The new system also aims to increase operational efficiency, both for the banks as well as the customers.

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