http://prashantnepayments.blogspot.in
Cheque Truncation System -- An Introduction
Like them or Dislike them, Cheques in India
Though the retail as well as corporate customers are slowing moving towards electronic payments modes (RTGS/NEFT/ECR/ATM/CARDS), there is still demand for paper Cheques.
Paper Cheques are widely preferred in the following Payment Needs: ---
01) Telephone/Electricity/Water Bills
02) Credit Card Payments.
03) Local Government Taxes.
04) Post dated commitments.
Etc
Hence, Reserve Bank of India
01) Safer 02) User-friendly 03) Faster
Toward this end, the Cheque Truncation System was sought to be intoruced in our country.
What is Cheque Truncation System?
- Truncation is the process of stopping the flow of the physical cheque issued by a drawer to the drawee branch.
- The physical instrument will be truncated at some point en-route to the drawee branch and an electronic image of the cheque would be sent to the drawee branch along with the relevant information like the MICR fields, date of Presentation, presenting banks etc.
- Thus with the implementation of cheque truncation, the need to move the physical instruments across branches would not be required, except in exceptional circumstances.
- This would effectively reduce the time required for payment of cheques, the associated cost of transit and delay in processing, etc., thus speeding up the process of collection or realization of the cheques.
Why Cheque Truncation in India
Cheque Truncation
i. speeds up collection of cheques and
ii. therefore enhances customer service,
iii. reduces the scope for clearing related frauds,
iv. minimizes cost of collection of cheques,
v. reduces reconciliation problems,
vi. Eliminates logistics problems etc.
With the other major product offering in the form of RTGS, the Reserve Bank created the capability to enable inter-bank payments online real time and facilitate corporate customer payments.
The other product, National Electronic Funds Transfer, is an electronic credit transfer system. However, to wish away cheques is simply not possible and that is the reason why the Reserve Bank of India
Moreover contrary to perceptions, Cheque Truncation is a more secure system than the current exchange of physical documents in which the cheque moves from one point to another, thus, not only creating delays but inconvenience to the customer in case the instrument is lost in transit or manipulated during the clearing cycle.
How the uniqueness of the cheque would be imparted to the image?
- The images captured at the presenting bank level would be transmitted to the Clearing House and then to the drawee branches with digital signatures of the presenting bank.
- Thus each image would carry the digital signature, apart from the physical endorsement of the presenting bank, in a prescribed manner.
- In order to ensure only images of requisite quality reach the drawee branches, there will be a quality check process at the level of the Capture Systems and the Clearing House Interface. This would ensure only images of requisite quality secured with the digital signatures of the presenting banks reach the drawee branches.
Who can participate in the Cheque truncation system?
- The criteria for banks participating in the Cheque truncation system are:
- Membership of the clearing house in the NCR. ( As CTS is still live only in NCR –
- Membership of the Indian Financial Network (INFINET)
How the non-INFINET member banks can participate in the CTS?
- In respect of banks who are not members of the INFINET, the following alternatives are available.
- They may become the sub-members of the direct members or such banks may use the infrastructure of the other banks having INFINET membership without being the INFINET members themselves and there clearing settlement can be done either directly or through the member through whom they are participating.
Thus the benefits could be summarized as:
a) Faster clearing cycle;
b) Better reconciliation/verification process
c) Better Customer Service Enhanced Customer Window
d) T+0 for Local Clearing and T + 1 for inter-city clearing.
e) Elimination of Float Incentive to shift to Credit Push payments.
f) The jurisdiction of Clearing House can be extended to the entire country. No Geographical Dependence
g) Operational Efficiency will benefit the bottom lines of banks Local Clearing activity is a high cost no revenue activity.
h) Minimises Transaction Costs.
i) Reduces operational risk by securing the transmission route.
Cheque Truncation System(CTS) in India
After the initial hiccups associated with CTS were staiblised, MICR clearing was abolished in NCR-New Delhi w.e.f 01/07/2009, and at present only CTS is functioning in NCR-New Delhi.
The next step for Cheque Truncation System (CTS) is Chennai.
However, before CTS is introduced in Chennai, Reserve Bank of India
Cheque Truncation System – 2010 – (CTS 2010) Guidance Note by National Payments Corporation of India (NPCI)
Cheque Truncation System – 2010 – (CTS 2010) Guidance Note by National Payments Corporation of India
As the deadline for CTS-2010, is coming closer, the various stake-holders are getting their act together
As per RBI Notification No RBI/2009-10/323/DPSS.CO.CHD.No.1832/04.07.05/2009-10 dt.February 22, 2010, IBA(Indian Banks Association) and NPCI, are the coordinating agencies, for CTS - 2010.
Towards this end, NPCI has on 21st September, 2010 issued a Guidance Note for the roll-out.
The complete Guidance Note can be accessed at
The highlights of the Guidance Note are :
Orders placed by Banks for Cheque Forms, on or after 01/10/2010, must comply with CTS – 2010 Security features
The Security features contain Mandatory features as well as Optional features
The Mandatory Security features are : -
A) Water Mark (to be incorporated at the paper manufacturing stage)
B) Void Pantograph ( at printing stage)
C)Ultra-violet logo of Bank(at printing stage)
D) Standardized field placements of a cheque
E) Cheque printing colours and background.
F) Microlettering.
G) New Rupee Symbol at CAR (Courtesy Amount Recognition) amount in figure field.
H) Printer Name along with CTS – 2010
Optional Features:- These are optional features based on the Banks risk perception.
(i) Supplementary watermark containing their own logo - - - A watermark is a recognizable image or pattern in paper that appears as various shades of lightness/darkness when viewed by transmitted light (or when viewed by reflected light, atop a dark background), caused by thickness or density variations in the paper
(ii) Embedded fluorescent fibres, - - - Invisible colored fluorescent fibres are embedded into the paper during the manufacturing process. The fibres are invisible to the naked eye, but become visible when viewed under an ultra violet lamp. This can be placed at random locations or at pre-determined locations on the Cheque forms.
(iii) fugitive ink, - - - Water fugitive ink is sensitive with most liquid solutions and will smear and stain the document. Most official stamps uses water fugitive inks (McGraw-Hill, 2007). This security feature makes it apparent if a document has been altered.
(iv) secondary fluorescent ink, - - - Fluorescent inks are naturally bright inks that reflect and emit light making use of UV light waves, which other inks cannot take advantage of.
(v) Toner fusing - - - Toner Fuse Technology causes Laser Toner to bond permanently to the paper surface. This covert security feature makes it impossible to "lift" words and numbers off the surface of the paper using adhesive tape, without destroying the paper surface.
(vi) check- sum.
(vii) Patterns
(vii) Floral designs
(ix) bleeding ink, - - - An option of bleeding ink could be implemented on a cheque which makes fraud impossible using any water based chemicals, if applied to the cheque a colored solvent reacts and spoils the cheque.
(x) Structural magnetic security thread
(xii) Hot stamped holograms on multi-city cheques and demand drafts
(xiii) auto-detection tools
(xiv) Use of UV band on sensitive and key areas of interest on a cheque such as Legal Amount Recognition (Amount in Words), Courtesy Amount Recognition (Amount in Figures), Signature, Beneficiary Name
(xv) pre-encoding of amount field on the MICR band for demand drafts / pay orders (above a self-decided cut-off) before issue to customers
(xvi) Use of check-sum on the face of demand drafts / pay orders (other than the MICR band), etc.
NPCI has advised banks that the additional security features adhere to CTS – 2010 specifications and also not Image heavy.
The deadline for implementation of the CTS 2010 standards is 31/12/2010.
-------------------------------------------------------------------------------------
One of the interesting aspect of this Guidance Note is that the CTS 2010 Specifications are applicable to all Cheque forms, and not only for Cheques forms for branches under the CTS (Cheque Truncation System) locations.
This might be to ensure that the Speed Clearing process does not get de-railed and also to ensure uniformity amongst the Cheque forms, in our country.
As the INR symbol has been adopted, this also is finding place on the new Cheque Forms.
I guess the next Guidance note will be on the transition period for existing Cheque Forms, already in the financial system. As it is, still Non-MICR cheques are being issued by few Government Departments.
------------------------------------------------------------
No comments:
Post a Comment