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Almost all individual who has an active bank account often uses Cheque as one of the primary tool for all of their important transactions like transferring money to friends and families, making payments of bills etc. However, the usage of cheque for monetary transaction has been lately under scanner because of its misuse by unscrupulous elements and also other issues that causes inconvenience to the customers such as delay in clearance due to lengthy processing time, loss of cheques during transit while in process for outstation clearance etc.

To overcome this problem, RBI had recently reduced the validity of cheques from 6 months to 3 months and this came into effect from around 1st April 2012. In addition to this, Reserve Bank of India has now made it mandatory for banks to issue and accept cheques which conform to the new standard called Cheque Truncation System (CTS 2010) - a new benchmark for cheques in India.

What is Cheque Truncation System or CTS 2010?

In simple words, this new standard would stop the flow of physical instruments to the drawee bank branch for clearance and instead use the electronic image of the cheque to be sent to the drawee bank branch along with few other details like presentation date, MICR fields etc. This will ensure that the clearance of the cheque is made fast and with least cost involved in the process.

In the existing system, if a person 'A' issues an A/C payee cheque of State Bank of India to person 'B' who deposits the same into his account maintained at UCO Bank, then UCO Bank would send that cheque to SBI for clearance to determine that it is valid and in turn accept the payment on behalf of person 'B'. UCO Bank would then credit the amount to Person B's account at their bank. This process is not as smooth as it seems because the cheques are dispatched to the drawee bank in physical mode which may take a significant amount of time depending on the location of the drawee branch. With CTS 2010, as cheques will be send in electronic form (i.e. scanned image) the clearance of cheque would be very fast and secure from fraud and other problems related to loss during transit.

The default layout of the new CTS 2010 cheques in India will be as follows:-

The VOID pantograph as seen above is one hidden feature that will discourage colour photocopy or scanned colour images of cheques.

Key specifications & Characteristics of CTS 2010 Cheques

Some of the distinct features of CTS Compliant Cheques are as follows:-
  • A standardised watermark reflecting 'CTS-INDIA' will be present in oval shape and will be visible when brought under light sources.
  • Towards the bottom right location, there will be a text with the words that reads 'Please sign above this line' to put the signature.
  • On the left bottom location, there will be wordings indicating "Payable at par all branches of _______________ bank in India"
  • It won't accept any correction or alteration with initials/signature validating the change. It will be considered invalid if there is any alteration.
  • It is important to write down the payee details, amount and signature on CTS compliant cheques with dark ink pen to be considered valid.
  • The logo of the concerned bank will be printed with ultraviolet ink and will be visible only when brought under UV scanners or lamps.

For the rule prohibiting alteration, changes made for validating dates may however be acceptable while all other changes will be deemed invalid to avoid fraudulent alterations. In addition to the security features embedded on the cheque leaf itself at manufacturing stage and/or printing stage, the digital image of the same while being forwarded to the clearance house will also include a digital signature of the presenting banks and will also go through quality checks to ensure that only quality image reaches the drawee branch. Other security measures like PKI is likely to be followed which might include hash algorithm SHA-1, RSA asymmetric encryption with 1024 bit key length, 3DES, TDES symmetric encryption etc.

In case you are confused about the above mentioned terminologies and the actual working of this new benchmark known as the Cheque Truncation System (CTS 2010), you may simply take note of the fact that all standard cheques will become invalid post December 2012 and the new standards will be adopted. As such, account holders of all banks in India should surrender their unused cheque leafs and exchange them for the CTS compliant one's before 31-12-2012.

So, hurry and contact your bank branch to know more details about the Cheque Truncation System and obtain your CTS compliant cheque book.
Tags: Editorial

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