India’s largest lender the State Bank of India (SBI) will implement the cheque truncation system (CTS) 2010, the new standard of cheques as mandated by the Reserve Bank of India; from January 01, 2013. The measure is primarily aimed at serving duel objectives: preventing frauds related to cheque and speedy clearing of the same.
“All the customers of State Bank of India are hereby informed that as per directive issued by the Reserve Bank of India, for standardization and enhancement of security features in cheque form and its migration to ‘CTS-2010’ standard, all branches of our bank will now issue only ‘CTS-2010’ standard cheques to their customers,” the banking behemoth on Monday said in a public notice.
With this, the bank will not accept all the non-CTS cheques (that you issue from your existing cheque book) and those will be out of circulation from December 31, 2012. Hence, the existing customers are now required to surrender their existing cheque book and ask for CTS-2010 benchmarked cheques.
“This move is a kind of alternative to physical cheque clearing,” Shiva Kumar, managing director at State Bank of Bikaner and Jaipur (SBBJ) told moneycontrol.com.
“Some key security features are added to it. Now, the paying bank will send the scanned image of a cheque instead of physically presenting it. This form of cheques will prevent fraudulent activities as well. Cheques cannot be altered under this new system. All SBI group banks too will introduce it from January 01,” he said.
SBI’s move is widely expected to prompt other big banks to execute the new process. Some foreign and private sector banks already commenced the process of migration from the existing to new standard. According to a spokesperson at SBI, the bank may issue further clarification on Tuesday in this regard.
Earlier in December, 2011; RBI had issued a notification relating to the implementation of CTS 2010 standard.
“The introduction of new cheque standards ‘CTS 2010’ was warranted on account of several developments in the cheque clearing viz. growing use of multi-city and payable-at-par cheques at any branch of a bank, increasing popularity of speed clearing for local processing of outstation cheques and implementation of grid based cheque truncation system (CTS) for image-based cheque processing,” it said.
What is cheque truncation?
Cheque truncation system (CTS) was implemented by RBI at New Delhi Bankers Clearing House on a pilot basis. Chennai of late, too executed the same process.
Cheque truncation, according to National Payment Corporation of India (NPCI) is the process in which the physical movement of cheque within a bank, between banks or among banks and the clearing house is curtailed or eliminated, being replaced in whole or in part, by electronic records of their content (with or without the images) for further processing and transmission.