Considered to be a major milestone in the history of Indian banking, Cheque Transaction System (CTS) aims to make cheque clearance more efficient and reduce the clearance time of cheques to one day, thereby trimming down the floating time considerably. India processes as many as 1.2 billions cheques annually and therefore, the implementation of this system would drastically cut down the waiting period involved. The system will be implemented nationwide from January 1, 2013.
How does it work?
An online image-based cheque clearing system, the collecting bank branch would deploy scanned images along with the magnetic ink character (MICR) of the cheque which will be sent out electronically using their Capture System, removing the need for physical/manual transfer of cheques. The captured images and the data is then signed and encrypted and sent to the Clearing House or the central processing location and thereafter forwarded to the drawee or paying bank.
This helps speed up the cheque collection process that eventually helps provide better and faster customer service.
Key Features of Cheque Truncation System
Impact of CTS on Customers
Handling of EMIs with the Introduction of CTS
In cases where customers have issues post-dated cheques (PDC) for payment of monthly installments towards an ongoing loan, they would need to issue fresh cheques to the bank or service provider as per the new directive on CTS by the RBI. The replacement of these cheques needs to be done latest by December 31, 2012 and is applicable on all banks and NBFCs.
Encashment of Old Cheques
If you have an old cheque with you, you should get it encashed by December 31, 2012. The RBI mandate states that payments for such cheques will be honoured only till then.
Banks need to issue the new types of CTS-compliant cheque books with the prescribed features to all their customers latest by December 31, 2012. Customers may need to surrender their old cheque books or cancel them and show proof of cancellation. No replacement fee will be charged by the bank for issuing new cheque books
Apart from these aspects, the system does not, in any way, affect the way things function for a customer. They would continue using cheques as they do currently; however, cheques that have been altered or modified will not be permissible under the new system. The other precautions that need to be taken while issuing or writing a cheque are:
Benefits of CTS for Customers
There are many benefits of the cheque truncation system from the perspective of a customer.