Of late you must have noticed advertisements in newspapers put up by banks
urging account holders to stop circulating non-CTS compliant cheques and
replace their old cheque books with new CTS enabled ones. Some banks also created awareness through various modes of communication
like SMS alerts, letters, display boards in branches and ATMs, pop-up messages
in internet banking and notification on
website. All this is because we are moving from an old format to a new format
of cheque clearance in India. Beginning 1st Apr ’13, Cheque Truncation System
(CTS) would be implemented, whereby the flow of the physical movement of the
cheque will be eliminated in the cheque clearing process. Instead, an
electronic image of the cheque will be sent along with relevant information. While
the existing cheque standard was supposed to be phased out from circulation
beginning 2013, the Reserve Bank of India (RBI) extended the deadline to 31st
Mar ’13 based on representations by some banks as they needed more time to set up
the systems. The shift from the old system to the new cheque format essentially
means that if you have given any post-dated cheques to your banks for loan EMIs
you will have to replace them with new cheque leaves. And if you hold
any post-dated cheques beyond 31st March you will have to
arrange to get it replaced with a new Cheque Truncation System cheque. CTS is
an efficient way of clearing cheques. It is in fact, better than the existing
method. This article attempts to explain CTS and its benefits both to account
holders as well as banks.
