Cheque Truncation System (CTS) – what it means for you

Over the last couple of months, you must have received communication from your banks stating that cheque books have to be CTS compliant. Those that are not compliant will be unusable after 31st July 2013. So, what is CTS?

Cheque Truncation System (CTS) was pioneered by the Reserve Bank of India – RBI, for faster clearing of cheques. It involves sending an electronic image of the cheque together with its Magnetic Ink Character Recognition (MICR) data, and other relevant fields like date of presentation, presenting bank’s name, etc. This procedure would eliminate the need for physical transfer of cheques across branches, except in certain cases.

How will CTS impact you, the account holder?

CTS will be implemented from 1st Aug, 2013; hence, you have to ensure that your cheque books are CTS compliant, else you won’t be able to use them.

Don’t forget to ensure that all cheques paid by you as advance EMI’s of loans will have to be replaced with CTS compliant cheques. Although this may be a one-time tedious exercise, there are manifold advantages in adopting this system, such as:

  • As the cheques would be cleared electronically, there is no fear of loss of cheque in transit.
  • Faster clearing leading to faster credit of funds to your account.
  • CTS compliant cheques being more secure, there are lesser chances of fraud.
  • As the system progresses and geographical restrictions are overcome, even multi-city cheques could be cleared on the same day.

Benefits of CTS for account holder & bank

Benefits to your bank

CTS ensures that along with you, the benefits are passed on to your bank as well. As cheques continue to form nearly 80% of all banking transactions, simplifying and making the clearing process efficient and secure was the need of the hour. Hence, CTS was introduced by the regulators. Banks will benefit in many ways such as:

  • Reduction in cost of transit and errors due to manual work.
  • Reconciliation/verification will also be faster.
  • Shorter clearing cycle benefits both bank and customer.
  • CTS will give operational efficiency a boost as cheque clearing is a high-cost-low-revenue activity.
  • Reduction in risks involving paper clearing, as they are most prone to frauds.

Conclusion

CTS is a move in the right direction and will ensure efficiency, transparency, security and faster credit of funds benefiting both you as well as your bank. Hurdles due to jurisdiction and geographical restrictions will be obviated and you can have faster access to your funds. It’s a win-win situation for banks as well as you.

So, What do you think of this article?

comments

Don't have Facebook login? Leave your message here