The following article is mainly for Indian viewers.
Why are we moving to a new cheque system?
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Considered
to be a major milestone in the history of Indian Banking, Cheque Truncation
System (CTS) aims to make cheque clearance more efficient and reduce the
clearance time of cheques to one day, thereby trimming down the floating time
considerably. India processes as many as 1.2 billion cheques annually and
therefore, the implementation of this system would drastically cut down the
waiting period involved.
The
system will be implemented nationwide from July 1, 2013.
How does it work?
An
online image-based cheque clearing system, the collecting bank branch would deploy
scanned images along with the magnetic ink character (MICR) of the cheque which
will be sent out electronically using their Capture system, removing the need
for physical / manual transfer of cheques. The captured images and the data is
then signed and encrypted and sent to the Clearing house or the Central
processing location and thereafter forwarded to the drawee or paying bank. This
helps speed up the cheque collection process that eventually helps provide
better and faster customer service.
Key features of Cheque
Truncation System
a) User friendly graphic user interface
b) Automated coding and endorsing of
cheques
c) Encryption of data file before transmission
to the clearing house or the service branch
d) Employs a unique transaction follower
process to confirm the status of the cheques
e) Improved and efficient settlement and
prevention of fraud
f) Equipped with enhanced archival procedure
that stores images and data facilitating report generation along with future
enquiry
g) Alerts RMs in case of return of
cheques due to insufficient funds
Impact of CTS on Customers
Handling of EMIs with the introduction
of CTS
In
cases where customers have issued post-dated cheques (PDC) for payment of
monthly instalments towards a running loan, they would need to issue fresh
cheques to the bank or service provider as per the new directive on CTS by the
RBI. The replacement of these cheques needs to be done latest by 30th
June, 2013 and is applicable on banks and NBFCs.
Encashment of Old
Cheques
If
you have an old cheque with you, the same should be encashed by June 30, 2013.
The RBI mandate states that payments for such cheques will be honoured only
till then.
Banks
need to issue the new type of CTS-compliant cheque books with the prescribed
features to all their customers latest by June 30, 2013. Customers may need to
surrender their old cheque books or cancel them and show the proof of
cancellation. Some banks are contemplating advising their customers to use the
old cheque books for withdrawing cash and other transactions within the branch
such as transfer from one account to another etc. No replacement fee will be
charged by the bank for issuing new cheque books.
Apart
from the above aspects, the system does not, in any way, affect the way things
function for the customer. They would continue using cheques as they do currently;
however, cheques that have been altered or modified will not be permissible
under the new system. The other precautions that need to be taken while issuing
or writing a cheque are:
a) Ensure that all details are clear and
readable, using black or blue ink
b) Write the name of the payee, amount and
the date and sign the cheque correctly
c) In the event of usng seals on the
cheque, ensure that they are imprinted in a manner that they do not mask or
hide the other important fields of the cheque
Benefits of CTS for
customers
There
are many benefits for the customer in the cheque truncated system.
Clearance
cycle gets shortened. With the implementation of this system, the physical or
manual movement of cheques would cease. The settlement process becomes quick, as
the cheques are being transmitted in electronic form. This facilitates
reduction in the clearance cycle.
The
fear of loss of cheques during transit from the collecting bank to the drawee
or payee bank is eliminated.
Limitations
of the current clearing system with respect to jurisdiction and geography are
eliminated. This enables integration and consolidation of several clearing
locations across various banks offering different service levels into one standard
clearing system applicable to the whole country.
CTS
helps reduce the scope for fraud significantly. Moreover, the electronic transmission
is quick and allows early detection of any alteration with respect to the
payee, amount or the issuer of the cheque. CTS prescribes minimum features under
‘CTS-2010 standards’ along with superior verification process that further facilitates
in the reduction of frauds.
The
operational efficiency of both the banks as well as the customer is enhanced
with the introduction of this system
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