Cheque transactions are going to be faster, less risky by the end of this calendar year. All banks including regional rural banks and co-operative banks will have to compulsorily switch over to the new Cheque Truncation System (CTS) from December 31, 2012. The implications are huge for the banking system that deals with up to 6 million cheques valued at about Rs 50,000 crore daily. For instance, RBI data shows that 107 million cheques worth Rs 7,81,300 crore traveled through the clearance centres in August 2012.
From the New Year, banks will accept only CTS 2010 standard cheques at their counters. This would means borrowers who had given post-dated cheques to finance companies and housing finance firms for their monthly loan repayments will have to replace their current cheques with CTS 2010 cheques. The RBI had already directed banks to issue only multi-city and payable at par CTS-2010 cheques to customers from September 30, 2012. Delhi including the NCR and Chennai will see the least impact as banks here are already on the new platform. This is the reason why no cheques can carry an alteration now even when signed by the customer.
CTS-2010 is essentially a collection of standards that make all cheques from every bank largely homogeneous. They carry some common basic features that help the banks where a customer deposits a cheque to identify the genuineness of the instrument. Bankers say the homogeneity in security features act as deterrent against frauds, and the fixed field placement specifications facilitate straight-through-processing at drawee banks’ end through the use of optical or image character recognition technology.
The RBI says the introduction of CTS 2010 was warranted on account of several developments in the cheque clearing — growing use of multi-city and payable-at-par cheques at any branch of a bank, increasing popularity of speed clearing for local processing of outstation cheques and implementation of grid-based CTS for image-based cheque processing etc.
How does CTS work? Truncation is the process of stopping the flow of the physical cheque issued by a drawer at some point with the presenting bank en-route to the drawee bank branch. In its place, an electronic image of the cheque is transmitted to the drawee branch by the clearing house, along with relevant information like data on the MICR band, date of presentation and presenting bank. Cheque truncation thus obviates the need to move the physical instruments