NEW BANK CHEQUES IN OFFING

[Dr. Sanjiv Agarwal]

The banking practice shall soon change for all of us when the new cheque regime comes into force w.e.f. January 1, 2013 which shall be mandatory. The new cheques are technology compliant so that their scanning and transmission could be done online.

India shall be migrating to new cheque truncation system, popularly called CTS with the objective of making inter-bank transactions and money related transactions faster, cheaper and safer. The payment settlement system including clearing will become more robust and mechanical leaving very little room for human errors. The entire banking industry in India- be it public sector or private sector, banks will implement the new cheque books w.e.f. 1^st January 2013. 

Advantage CTS Efficient cheque clearing cycle Less human intervention and errors No physical transfer of funds faster Low cost of transaction Safer – no frauds may happen High security cheque forms Loss in transit eliminated.

The cheque books which most of us presently use will no longer be in use from January 1,2013. Even if a cheque has been issued in old form before 1^st January 2013, it may not be cleared for technical reason if presented on or after January 1, 2013. However, Reserve Bank of India had earlier in April, 2012 asked the banks to move to CTS system from October, 2012 but it could not be implemented as banks started issuing CTS cheque books from September, 2012 only.

The new cheque books which will be in used and accepted in new year has certain peculiar security features. Old cheque leaves will not be accepted by banks for clearing and only new feature cheques will be honoured. That’ why all banks are asking their customers to get the new cheque books issued by SMS, be email, by letter and even by way of public announcement.

Under the new CTS, new form cheque books shall be used which will carry a special water mark of ‘CTS- India’ visible under any light source. Not only this, if someone tries to obtain a photocopy of the same, the word ‘VOID’ will be visible on photocopies. In CTS, only the scanned image of cheque would travel online.

Such cheques will be cleared for payment within 24 hours as against 2-4 days now as it would eliminate physical movement of cheques from branches to the clearing house of Reserve Bank of India. Presently cheques are physically cleared and payments are effected by third day after the cheques are lodged for clearing. Henceforth, cheques would be cleared for payment by electronic mean through online payment gateway which will be encrypted and hence highly secure. Cheques will be cleared on the basis of electronic images. CTS will also reduce the handling time for a cheque as the scanned image will bear the image of specimen signature also along on the computer screen.  taxmanagementindia.com

While cheque related frauds will come down substantially in new cheque truncation system, it may end up levying some cost of transaction on the customers at a later stage. This is because it involves huge investment. However, recurring costs to bank will be reduce so far as manpower cost, logistics, travelling and other operational costs are concerned.

Though all banks have notified in advance about new CTS regime with effect from January 1,2013, RBI and may be liberal for some more time for which we will have to wait for  official announcement. However, if would be advisable for bank customers to switch to new CTS cheque books as early as possible in their own interest. 

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Discussions to this article

[SHIVA KUMAR]

It is a good system and the person who issues cheque should be careful enough to account balance, transit time is saved and fund movement is safe secure and fast.