CBI to probe frauds in cheque clearing system

Source: FC: Sarbajeet K Sen May 10 2010 , New Delhi

Less than a year after its launch in July 2009, the digital clearing system for bank cheques, which eliminates physical movement of the instrument, has already come under the radar of the investigating system.
The Central Bureau of Investigation (CBI) will be discussing the incidence of frauds under the system (called Cheque Truncation System or CTS in banking parlance) with bank chiefs at a meeting to be held on Thursday.

According to banking sources, among other issues for discussion between CBI and the banks is the apparent reluctance of the banks in giving permission to prosecute their officials even if they have been found to be prima facie guilty of mala-fide in transactions that hav-e led to losses to the banks.

Bankers said that there have been instances of fra-udulent use of the CTS by banker. “There have been cases where there have been material alterations at the end where the cheque is lodged in the system. The tampering is often not visible to the naked eye,” a chairman of a bank invited to the meeting said.

Through truncation, the physical movement of a cheque is stopped. Instead, an electronic image of the cheque is sent to the drawee branch along with the magnetic ink character recognition (MICR) fields, date of presentation and presenting banks. The process, which is presently operational only in the NCR and is being planned by the RBI to be made pan-India in the days to come, helps reduce the time required in cheque clearance.

Bankers said, the meeting is slated to discuss the issue of one-time settlement (OTS) of bad debts of the banks. “There has been an opinion that the OTS mechanism has often been used by bank officials to favour borrowers,” the banker said, on conditions of anonymity