Cheque Truncation System (CTS)

(For the benefit of those who have accounts in India)

The Reserve Bank of India announced that it has extended the deadline for banks to ensure withdrawal on Non Cheque Truncation System (CTS) cheque till March 31, 2013.

What is CTS-2010?

CTS-2010 is a benchmark for standardization of cheques issued by banks across the country. The main feature of CTS-2010 cheques is that a cheque can be cleared electronically.

Simply put, a CTS-2010 cheque will not have to go through the process of physical clearance. When a customer deposits a CTS-2010-complied cheque, the bank can simply send the cheque’s image to the drawee bank, whose cheque has been issued; once the drawee bank scrutinizes and recognizes the cheque, it will get cleared. This move will help banks save on transaction cost and time.

What are the features?

CTS-2010 cheques will have security features such as a certain type of paper, CTS watermark, bank’s logo in invisible ink and a standard field placement for all banks.

Paper: CTS-2010 standard paper doesn’t glow under ultra-violet light. The paper will be image friendly and have protection against alterations by having chemical sensitivity to acids, alkalis, bleaches and solvents giving a visible result after a fraudulent attack.

Watermark: All CTS-2010 cheques will carry a standardized watermark with the words “CTS INDIA”, which can be seen when the cheque is held against a light source. You can see it in the same manner as you see Mahatma Gandhi’s image on a `500 note. Each cheque must hold at least one full watermark. The watermark will appear at the centre of the cheque.

Bank’s logo: The bank’s logo will be printed in ultra-violet (UV) ink. The logo will be visible under UV-enabled scanners or lamps. The banks logo has to be on the left top of the cheque.

Prohibition on corrections on cheques: Any kind of changes or corrections will not be acceptable. This means for any change in the payee’s name, amount in figures or amount in words, you will have to write a fresh cheque as it causes difficulty in electronic clearance. This also helps banks to identify and control fraud.

Additional text: The new cheque will also have “please sign above this line” mentioned at the bottom right of the cheque, a feature that was not available in cheques in use until now. Also, a statement “payable at par at all branches of the bank in India” will be written on the bottom of the new cheque.

Standardization of field placement: This basically means having the account number, watermark and bank logo, among other security features, positioned at the same place in cheques of different banks to make clearance through image easier. For example, cheques of all banks would have the watermark at the centre of the cheque.

All these features would ensure uniformity across cheques issued by various banks as well as help banks scrutinize cheques properly, which in turn is expected to act as a deterrent against cheque frauds.

What should you do?

Post-dated cheques: All post-dated non-CTS cheques will be out of use from 1 January 2013. An RBI spokesperson has clarified that all customers should, in their own interest, collect the signed non-CTS cheque given by him to his lender, say, a non-banking financial company, brokers and individuals, and cancel it so that such non-CTS cheque is not presented in the clearing system. The customer should intimate the bank along with the number of the non-CTS cheque and the individuals or company’s name, that the non-CTS cheque has been collected and cancelled.

If you don’t remember where you have given the cheque, you can go back to the front page of your cheque book and give the cheque numbers to the bank, informing that you don’t remember whom you have given it to. However, you need not worry as non-CTS cheque will automatically get cancelled from the system from 1 January 2013.

Cheques you haven’t encashed: If you have any cheques lying with you, which you can encash, you should do it as soon as possible. If you have any post-dated cheque for a date/month after 1 January 2013, ask the person/institution concerned to issue a CTS-2010 cheque, as the old one will not be valid after 31 December.