Cheques are still the prominent mode of payment in India even after introduction of RTGS and NEFT form of making payments. To improve efficiency of Cheque clearing process, RBI has issued CTS as an alternative to the old process of clearing cheques in physical form. Under CTS, Cheques can be cleared electronically.
Cheque truncation is a process used in CTS, in which an electronic image of the Cheque is transmitted to the paying bank by the clearing house (place where Cheque has been presented for payment) along with other relevant information instead of sending physical document.
As such CTS is more secured than exchange of physical document between banks. It provides better service to customers by reducing the processing time and cost of banks.
How CTS Process Works
In CTS process, the bank where you present your Cheque for payment (presenting bank) captures MICR data and image of the Cheque to process it to paying bank for payment.
Before processing, the presenting bank has to sign and encrypt the data for security and safety reasons. For this process the presenting bank and paying bank has been provided with a gateway called Clearing House Interface which enables bank to transmit data and image in a secure manner.
After arriving at a settlement figure, the paying bank routes the image and relevant data to the presenting bank for payment. Presenting bank receives the data and image through their clearing house interface and accordingly proceeds for payment processing.
Features of CTS Cheque
- Issued with a special paper which is image friendly and protect you against alteration with chemicals.
- IFSC and MICR are a must on every Cheque leaves.
- All Cheque leaves should carry a standardized water mark in words “CTS-INDIA”. You can see it at the center by holding it against any light source.
- Bank’s logo should be printed in ultra-violet ink on the top left side.
- At the right bottom corner, in place of signature, there should also be words “please sign above”
Benefits of CTS
- Speed up the process of settlement.
- No fear of loss of instrument in transit.
- Fraud as use to happen in earlier paper form of Cheque will be greatly reduced in this image based format.
- No geographical restrictions.
- Reduces operational risk associated to the earlier paper clearing process.
What to do Now
Here are certain instructions which can be followed;
- Look for “CTS-INDIA” mark on your present Cheque leaves by holding it against light source. If it is not marked then ask your bank to issue you a fresh Cheque book in CTS format. You can also look for “CTS-2010” mark on the left hand side of your Chq leaves as shown in above image.
- Use dark colored ink while writing chq, preferably in black pen to capture the image better.
- For image based processing, avoid any alteration or correction to your Cheque. In case of alternation or correction issue a fresh one.
- If you have issued any post dated cheques in old format then you have to collect it from the party for cancellation and make sure that these NON-CTS cheques are not presented for payment. Simultaneously inform your bank with the Chq number that these NON-CTS cheques are collected and cancelled.
- If you have any post dated NON-CTS Cheque in your name or company’s name or issued to you then get it cancelled and request your payer for a fresh CTS Cheque.
To curtail Cheque frauds on account of alterations in various fields, under this new format you can not make correction except to the filed of date validation. If any mistakes are done in payee’s name and amount in words or figures then fresh Chq leaves are to be issued.
However, this restriction is only for those cheques which are cleared under image based process. If you want to withdraw a Cheque or issue a self Cheque then this prohibition will not work for you.
If in case, you want to see the Cheque through which payments are been collected from your bank account then you can not see that from your bank’s branch office. As under this process the presenting bank retains the Cheque with them, you need to ask the presenting bank for it.
You can request your bank to have it from the presenting bank. For this reason the presenting bank has to retain such cheques with them for a period of 10 years.
Based on the progress made by banks in compliance to CTS scheme, on July 16th 2013, RBI has extended the use of old NON-CTS Cheque up to December, 2013. After this date NON-CTS cheques are not used.