Making cheque transaction faster and safer

Last Updated: Mon, Dec 31, 2012 05:22 hrs

What is cheque truncation?
Truncation is the process of using an electronic image of a cheque, instead of using the physical instrument, while presenting it for clearing. The electronic image of the cheque is transmitted to the drawee branch by the clearing house, along with relevant information such as data on the MICR (magnetic ink character recognition) band and date of presentation. This makes the clearing process faster and safer.

Will there be any change in the process for customers ?

No. But customers must use image-friendly coloured inks while writing a cheque. Customers used to receiving the instruments (like from government departments) would also receive the cheque images. Cheques with alterations in material fields are not allowed to be processed under the cheque truncation system (CTS).

What is the meaning of alteration in material fields ?
No changes or corrections can be carried out on the cheques (other than for date validation). For any change in the payee's name, amount in figures or amount in words, fresh cheque leaves should be used. This would help banks identify and control frauds. This prohibition is only applicable to cheques cleared under the image-based cheque truncation system and is effective from December 1, 2010.

What type of cheques can be presented for clearing through CTS?
All types of cheques can be presented for clearing through CTS. It is no different from the use of traditional clearing infrastructure for clearing paper cheques.

What are the benefits of CTS?
The benefits could be summarised as: shorter clearing cycle; superior verification and reconciliation process; no geographical restriction as to jurisdiction; operational efficiency for banks and customers; reduction in operational risks and risks associated with paper clearing.

What is cheque standardisation and what does CTS 2010 Standard mean ?
Introduction of CTS and the increasing popularity of speed clearing were some aspects that led to prescription of certain minimum security features in cheques. The Reserve Bank of India has prescribed certain benchmarks towards achieving standardisation of cheques issued by banks across the country such as quality of paper, watermark, bank's logo in invisible ink, void pantograph, field placements. Certain desirable features have also been suggested to be implemented by banks based on their need and risk perceptions. The set of minimum security features would not only ensure uniformity across cheque forms issued by banks but also help presenting banks while scrutinising and recognising cheques of drawee banks in an image-based processing environment. The homogeneity in security features is expected to act as a deterrent against cheque frauds, while the standardisation of field placements on cheque forms would enable straight-through-processing by use of optical and image character recognition technology. The benchmark prescriptions are collectively known as CTS-2010 Standard.

If a customer desires to see the physical cheque issued by him for any reason, what are the options available?
Under CTS, physical cheques are retained at the presenting bank and do not move to the paying bank. In case a customer desires, banks can provide images of cheques duly authenticated. In case a customer desires to see and get the physical cheque, it would need to be sourced from the presenting bank, for which a request should be made to his bank. Some cost may be involved in the processing.

What are the precautions to be taken by banks and customers to avoid frauds?
For customers:

  • Use CTS 2010 cheques that are image-friendly and have more security features. Request banks for cheque forms compliant with CTS 2010 standard. 
  • Preferably use dark ink while writing cheques and do not make any corrections thereon. 
  • A new cheque should be used in the event of any alterations.

For banks:

  • Exercise care while stamping the cheque forms, so that it does not interfere with the material portions such as date, payee's name, amount and signature. 
  • Rubber stamps should not block the features in image. Ensure essential elements are captured in an image.

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