The new system will minimise possibility of fraud, increase efficiency and cut costs
According to the new Reserve Bank of India (RBI) guidelines effective from December 1, 2010, cheque leaves with changes/corrections (with exception of changes / correction on date field duly countersigned) would not be honoured by the banks. Instead, a fresh cheque should be issued. This guideline will be applicable only for cheques cleared under the image-based clearing through Cheque Truncation System (CTS). Presently, the system is operational in Delhi, but will be implemented across India.
However, these guidelines will not be applicable for cheques submitted for:
• MICR Clearing
• Non- MICR clearing
• Over-the-counter collection (for cash payment)
• Direct Collection of cheques outside the Clearing House arrangement
CTS is based on electronic data/images without physical exchange of instrument. The cheque is scanned and electronically presented for settlement with the clearing house. The technology captures extracted data from the electronic images and ensures cheque validation, technical and signature verifications with minimal manual intervention that brings efficiency, accuracy and automation in the whole cheque-clearing process.
CTS helps speed up transactions with accuracy, reduces cheque clearing cost and minimises chances of cheque fraud. Reserve Bank of India's has issued regulations against alterations or modifications in cheques. Under the new system, banks will undertake standardisation of cheques that includes paper quality, watermark, VOID pantograph, bank's logo printed in invisible or ultraviolent (UV) ink, cheque's field placements with Optical/Image Character Recognition (OCR/ICR) engines, mandating colours and clutter free backgrounds and prohibiting alterations or corrections of cheques.
As per the new guidelines, alterations or modifications in cheques will be disallowed (even if a signature has been made at the place of alteration) and banks will dishonour any kind of altered cheques. All banks will have to strictly follow it.
CTS was piloted in the National Capital Region (NCR) in February 2008. The existing paper-based cheque clearing mode processed an average of about 4.5 million cheques per day during April to December 2009. Banks and clearing houses are faced with challenges such as variable cheque loads on certain days, time consuming manual processes and security or fraud related issues.
As such, there is a strong need for automation of inward clearance, standardisation and improved security, which CTS brings in.
