ChequeMan Blog

Tips to replace non CTS-2010 compliant cheques

The advent of CTS-2010 compliant cheques will make the existing cheques invalid from 31 July 2013. The customers who have deposited non-CTS cheques as post-dated cheques (PDCs) for EMIs to a finance company, or bank for repayment of a loan, will have to replace these with the compliant ones for installments after 31 July. The non-compliant cheques will not be honored by banks and will amount to non-payment and default on the part of the customer.

ECS debit mandate: If the cheques are not CTS-2010 compliant, the customer will have to provide an ECS instruction to debit his bank account for the loan installment. For this, ECS form has to be filled and submitted to the loan institution.

Documents: The signed ECS form, a copy of a cancelled cheque of the account from which the person wants the EMI installment to be debited, and CTS compliant EMI cheques for 2-3 installments (till the instruction is processed ) must be submitted.

Processing: The loan institution will accept the ECS instruction and the CTS-compliant PDC cheques, and will destroy the old non-compliant cheques.

Points to note

• A default on account of non-compliance will affect the credit score of the individual.
• In places where ECS facility is not available, the CTS-2010 compliant EMI cheques will have to be issued to the loan institution to replace the old cheques.

What is Travelers Cheques

Travelers Cheques are cheques issued by financial institution that can be used as a form of payment. These are mostly used by people who are travelling as it can be easily replaced by the issuing financial institution if lost or stolen. They are widely accepted all around the world. These are issued in various denominations such as US Dollar, Euro, Japanese Yen, Canadian Dollar, Australian Dollar, and British Pound.

At the time of purchase, the cheques are required to be signed as for the security purpose. The user has to again sign the cheque at the point of redemption so as to match both the signatures. At the time of purchase of cheques, the customer should be provided with the listing of the cheques purchased.

When using a cheque as the mode of the payment, customer provides the cheque to the merchant. He signs the cheque in presence of the merchant. Once the merchant verifies both the signatures, the applicable change is given back and the transaction is completed.

NO CHEQUE RETURN CHARGES WHERE NO CUSTOMER FAULT: RBI

Delay in re-presentation of technical return cheques and levy of charges for such returns

As you are aware, banks are expected to indicate the timeline for realization of local/outstation cheques in their Cheque Collection policy(CCP) and charges for cheque returns to be levied in an upfront manner with due prior notice to the customers as enumerated in RBI circulars no. DPSS.CO. (CHD) No. 873 / 03.09.01 / 2008-09 dated November 24, 2008 and DBOD.No.Dir.BC. 56 /13.03.00/2006-2007 dated February 2, 2007 respectively.

2. However, recently, instances have been brought to our notice where banks are (i) levying cheque return charges even in cases where customers have not been at fault in the return and (ii) delaying the re-presentation of the cheques which had been returned by the paying banks under technical reasons. Both of these issues result in unsatisfactory customer service.

3. It is, therefore, considered necessary to streamline the procedure followed by all banks in this regard. Accordingly, banks are advised to adhere to the following instructions with immediate effect:

• Cheque return charges shall be levied only in cases where the customer is at fault and is responsible for such returns. The illustrative, but not exhaustive, list of returns, where the customers are not at fault are indicated in the annex.
• Cheques that need to be re-presented without any recourse to the payee, shall be made in the immediate next presentation clearing not later than 24 hours(excluding holidays) with due notification to the customers of such re-presentation through SMS alert, email etc.

4. Banks are accordingly advised to reframe their CCPs to include the procedures indicated in paragraph 3(i) and 3(ii) above, and may note to give publicity to their revised CCPs for better customer service and dissemination of information.

5. The above instructions are issued under Section 18 of the Payment and Settlement Systems Act, 2007 (Act 51 of 2007).

6. Please acknowledge receipt and confirm compliance.

Yours faithfully,

(Vijay Chugh)

Chief General Manager

Annex

Illustrative but not exhaustive list of objections where customers are not at fault

(Applicable for Instrument and Image-based Cheque Clearing as detailed in Annexure D to Uniform Regulations and Rules for Bankers’ Clearing Houses)