Wednesday, 6 March 2013

CTS Cheques to be a reality from 1st April 2013, get you new cheques NOW

The Reserve Bank of India has mandated that all cheques in circulation from 1.4.2013 shall be CTS 2010 compliant.  What is CTS and how does it help us.  CTS stands for Cheque Truncation System.  


How does it help us.  In the current setup the current cheques take upto 3 days in cities and upto a week in the towns and villages to clear, and the amount is credited to you account only after physical verification by the issuing Bank.  Suppose you have issued a cheque of Yes Bank to XYZ on current date.  XYZ will deposit the cheque in his ICICI bank account the same day.  The amount may be debited from your Yes Bank account the same day, but it wont be credited into XYZ's ICICI account till the third day, when your issuing bank i.e. Yes Bank has physically verified the cheque and your signature therein.

As per the new system CTS instead of the cheque travelling all the way from ICICI bank to your bank, a image the cheque with certain security data is transmitted back to Yes Bank realtime.  This enables the Yes Bank to verify the signature in a single day thereby eliminating the two days of carrying the cheque to and fro for verification.  

Under the new scheme the cheques you deposit and the cheques you issue are liable to be credited and debited within 24 hours from the time of deposit.  

Why is there such hoopla over CTS cheques.  After 1.4.2013 (except in case if RBI relaxes the date further) the old cheques wont be allowed for clearing.  This will apply to all cheques that you have at present including the At Par cheques.  So if you have issued any Post Dated Cheques(PDC) to any financial institution you will have to take back those and issue them a fresh set of CTS cheques.  The financial institutions may or may not inform you about this requirement, but it will be worthwhile to remember that in case you don't give them a fresh set of cheques by March 31st, 2013, you may be liable for bounce charges and interest/penalty thereof if the bank or financial institution forwards you old cheque for payment.

The banks have informed that if within 28th February, 2013 you have not received the CTS compliant cheque you may approach the Manager of your bank for issue of CTS cheques. 
Do hurry as it will be a mess on 31.3.2013 with 4 Government holidays coming in a row and the last minute rush.  Get to the bank today itself when it not so crowded and get your new cheque book.

Following points  have to be kept in mind while post dated cheques after 31st March 2013:

EMI for on-going loans: Customers now have to reissue new cheques (CTS Compliant) for the payment of installments towards the on-going loans.  Do this instantly as you may miss your monthly payment, if you are based in some other station etc.
Encashment of old cheques: If you have cheques in non CTS format, you should get it encashed before 1st April 2013 or surrender/destroy old chequebooks.  You  need to surrender the old chequebooks and need to apply for the new CTS compliant Chequebooks.  In some cases the banks have informed the users to destroy the old chequebooks.  But please be sure to inform your bank before doing so.
Under the new system modification, alteration will not be permitted.  At present we tend to cancel the mistake and sign in to verify the modification, this system has been done away with in the CTS system so you have to issue a fresh cheque in respect of any mistake
The validity of cheques have been reduced to three months from six months validity cant be extended putting in a new date and signing in.  You will have issue a fresh cheque for time barred cheques.


Please to comment in about your queries.

Vijay Prabhu
Update : As on 3.4.2013, the RBI seems to have extended the date by 15 more days.  But this news is not confirmed.  I will post image of my own CTS compliant cheque book which I received yesterday.

Vijay



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2 comments

  1. can we write behind Instructions on the cts cheques like we used to do in old cheques

    ReplyDelete
  2. Mr.Abdullah nothing has changed with the CTS cheques other then the appearance of cheque. You can write instructions, validate errors, validate dates just like old one. And the truth is the payment is also credited after 3 days so I guess another gigantic exercise has gone waste.

    ReplyDelete

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