This article was originally published
in Postnoon on May 30, 2013; Co-Author: Anuj Hetamsaria
or
http://issuu.com/postnoon/docs/epaper_30_may_2013/13?e=4033961/2680231
Mr. Mukherjee was holding a sheet
of paper and walking towards me at the Park. He looked agitated as he always is
whenever faced with financial decision making or difficulty in understanding
something. He held out the paper even before he greeted me.
Prof. Nicky: What is this Mr.
Mukherjee?
Mukherjee: Read it. I got it from
my bank as an email today. What does this mean? What am I supposed to do?
Nicky: Okay, let me see.
The email read, "The RBI has
introduced a new Cheque Truncation System (CTS). All cheques issued from 1st
August, 2013 needs to be CTS 2010 compliant. Any old cheques or non CTS cheques
will not be accepted after 31st July 2013".
You don't need to worry Mr.
Mukherjee. RBI is implementing a new cheque
clearning system called cheque truncated system which is meant for faster
clearance of cheques.
Mukherjee: What is this CTS?
Nicky: CTS was introduced and
implemented in the National Capital Region (NCR) in February 2008 on a pilot
basis. The number 2010 in 'CTS-2010' is because the guidelines for CTS came up
in the year 2010.
As per wikipedia, CTS is
basically 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.
Mukherjee: But why should I worry about it? Since you taught me to use
internet banking, I hardly ever use the cheque. I transfer money using RTGS and
NEFT. Pay bills through internet banking.
Nicky: But didn't you give post dated cheques when you took a home
loan? Also, you may need to pay for your daughter's education through cheque,
many a times payments to government agencies need to be made by cheques, you
may receive cheque from someone. If not immediately, you will definitely get
affected by it in the future. So it would be best to be prepared rather than
sorry. This system is anyways for your safety and benefit.
Mukherjee: How so?
Nicky: Its easier for banks to implement and is less
costly than physical movement of cheques. It will result in shorter clearing
cycle, superior verification and reconciliation process. It will be faster as the physical movement of
cheques will stop and an electronic image of the cheque will be
transmitted with key important data. As the system matures, it is proposed to integrate multiple locations
and reduce geographical restrictions in cheque clearing. Hence,
there are chances of multi-city cheques getting cleared on the same day, going
forward.
It's not only beneficial from
users perspective, it's good from regulators and banks' angle too. It reduces
operational risk in banking. Scope for frauds are minimised under the CTS
regime, which is good for banks.
Mukherjee: What kind of
information will be transmitted electronically to the other bank?
Nicky:
Information like date of presentation, presenting bank details, data on the
MICR band.
Mukherjee:
And what about the changes to the cheque leaf itself?
Nicky:
A CTS compliant cheque leaf is different from a normal cheque leaf you
currently use, and has certain distinct features. Certain benchmarks have been
prescribed like quality of paper, watermark, bank’s logo in invisible ink, void
pantograph, etc, and standardization of field placements on cheques. This will
achieve standardization of cheques issued by banks.
The printer details along with the words ‘CTS-2010’ is mentioned along
the area where you tear off the leaf from the cheque book. The new symbol of
the Indian rupee is printed beside the area where the amount in figures needs
to be written. The words ‘please sign above’ are mentioned indicating the space
where you will need to sign the cheque.
Mukherjee:
It's good to know that the regulators are taking steps to introduce safer
processes for us!
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