Keeping A check

RBI's move to make all cheques issued by banks CTS-compliant may go a long way in checking frauds and easing transactions

From January 1 next year, all cheques issued by banks will have to be compliant with the Cheque Truncation System (CTS). The cheques will have to provide mandatory security features, such as quality of paper, watermark, bank's logo in invisible ink and standardisation of field placements.

Account-holders who have non-CTS compliant cheque books will have to surrender them to the bank before December 31 and get a fresh one issued. Also, all post-dated cheques issued by account-holders to non-banking financial companies for EMI payments, which are non-CTS 2010 standard compliant, will have to be replaced with CTS- 2010 standard compliant cheques. The Reserve Bank of India (RBI) had issued a notification to all non-banking financial companies to replace non-CTS 2010 standard compliant cheques with CTS 2010 standard compliant cheques before December 31, 2012.

The CTS is an online image-based cheque clearing system where cheque images and Magnetic Ink Character Recognition (MICR) data are captured at the collecting bank branch and transmitted electronically. The RBI, in a circular last year, emphasised that homogeneity in security features will act as a deterrent against cheque frauds, while the standardisation of field placements on cheque forms would enable straight-through-processing, both under CTS and MICR clearing.

The technology was first introduced in the National Capital Region and, subsequently, in Chennai. The cheque images captured at the presenting bank in the NCR are transmitted to the clearing house for onward transmission to the payee or drawee bank. It is the responsibility of the drawee bank to capture the inward data and images and generate the return file for unpaid instruments.

The electronic image of the cheque is sent to the drawee branch, along with the image of the deposit slip, which is clipped with the cheque by the customer. CTS reduces the scope for clearing-related frauds and minimises the cost of collection of cheque. For the bank, the benefits would be immense as it would help them introduce new products and optimise resources. Globally, CTS is being practised across many countries for faster clearing of cheques.

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