How the CTS system will help in faster and efficient cheque processing

The Reserve Bank of India (RBI) governor, Shaktikanta Das, said last week that all bank branches in India would put in place the cheque truncation system by September 2021. For those of us who still issue cheques, despite many Indians adopting to digital payments over the recent years, this is good news. Here’s what the cheque clearing system entails.

What is the Cheque Truncation System (CTS)?

The cheque truncation system (CTS) is a way to quicken the cheque clearing process – sending cheques across branches, verifying signatures physically and finally approving the payment is tedious. Enter the CTS. Here, there is no need for the receiving bank to physically courier the cheque. It only needs to send an image of your cheque. It’s like sending an email. Within seconds, the sender’s bank gets the image, verifies the cheque and all other details and clears the payment.

What does RBI’s latest announcement mean?

Last week’s RBI’s announced that the remaining 18,000 bank branches, which are outside the CTS system, will now come under it by September 2021.

The CTS has been in use since 2010 and covers around 1.50 lakh bank branches already, across three cheque processing grids (New Delhi, Chennai and Mumbai).

What are the main benefits of CTS?

Cheque processing becomes quicker. The receivers get the money faster.

CTS is also cost-efficient. Since there is no physical movement of cheques under CTS, the cost of collection of cheques comes down. “Moreover, logistics-related issues are removed and loss of instruments in transit is no longer a problem. This brings down frauds and operational risks associated with paper clearing and increases operational efficiency,” says Adhil Shetty, CEO, BankBazaar.com.

In the earlier system, when cheques were physically sent for validation, banks had to reconcile their records periodically. The technology-based CTS doesn’t require reconciliations.

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Is CTS safe and secure?

Yes, absolutely. The CTS system is devised in such a way that only a clean image of your cheque can be transmitted to the receiving bank. This means, not a single cancellation on your cheque is now allowed.

If you have made mistake, like misspelt the payee’s name or put in a wrong amount, then you need to use a new cheque leaf. A clean cheque copy helps banks control fraudulent alterations. Most of us used to make cancellations and then sign next to them, in the past. CTS cheques do not allow that.

Do I have to enrol for CTS? Or get a new cheque book?

You do not have to apply for anything separately. Just make sure that your cheque book is CTS-compliant.

To avoid frauds, banks recommend using "CTS 2010" cheques that are not only image friendly but also have more security features such as a certain prescribed type of paper, watermark on the cheque, bank’s logo printed in ultra-violent ink. The watermark, with ‘CTS-India’ is visible on cheque when held against a light source. Each cheque must hold a watermark at the centre of the cheque. The bank logo will be visible under ultra-violent scanners. All these security features would ensure uniformity across cheques issued by the banks and help them, scrutinize cheques deposited in a proper way. This is to reduce frauds through cheque transactions.

You should request your bank to issue cheques that are compliant with the "CTS 2010" standard. You should use image-friendly coloured inks while writing cheques. which are readable after scanning. Lastly, avoid any alterations or corrections on the cheque.