Existing cheque clearing arrangement will continue till year end

Good news for those having non CTS cheques left for clearing. RBI has declared that the existing cheque clearing system will continue till year end. Non-CTS-2010 cheques (ChequeÂ Truncation System) will continue to be cleared even after the deadline of July 31, 2013. However,banksÂ must continue to make efforts to withdraw the non-CTS-2010 standard cheques in circulation, said the Reserve Bank of India, in a notification issued on Tuesday.

The deadline for the withdrawal of non-CTS-2010 standard cheques is July 31, 2013 and banks have begun to issue fresh cheques in the CTS-2010 complaint format. But there is still a large volume of non-CTS-2010 format cheques being presented in image-basedÂ clearing. Hence, the existing clearing arrangements will continue till December 31, 2013.

New clearing arrangements will be put into effect with effect from January 1, 2014,Â in the three CTS centers â€“ Mumbai, Chennai and New Delhi – for clearing of non-CTS 2010 instruments. This separate clearing session will initially operate thrice a week (Monday, Wednesday and Friday), up to April 30, 2014.

Thereafter, the frequency of such separate sessions will be reduced to twice a week up to October 31, 2014 (Monday and Friday) and further to weekly once (Monday). If the day for clearing non-CTS-2010 instruments falls on a holiday, then these cheques will be presented on the previous working day. RBI further told that the operational instructions in this regard will be issued separately by the CTS centers.

Cheque Bounce may no longer put you in Jail

The government will soon make an amendment in the Negotiable Instruments (NI) Act for cheque bounce that will restrict banks from dragging a person to court. All such cases, after the changes come into effect, will have to be decided only through arbitration, conciliation or settlement by Lok Adalats.

It is estimated that more than 30% of all the pending cases in courts across the country are either related to cheque bounce or traffic challans. The proposed amendment in the NI Act has been recently suggested by an inter-ministerial group (IMG), which was set up last year to make suggestions for necessary policy and legislative changes to deal with a large number of cases pending in various courts.

The law ministry is working closely with theÂ finance ministryÂ and the surface transport ministry to make suitable changes in the law and cases falling under both categories (cheque bounce and traffic challans) will be ineligible to be taken to courts unless some other criminal intent is alleged.

The changes in the NI Act will make it compulsory for the disputing parties to resolve the matter through alternate disputeÂ resolutionÂ mechanism.

“The use of alternate dispute resolution mechanism on the lines of Section 89 of the Code of Civil Procedure, through arbitration; conciliation; judicial settlement including settlement through Lok Adalat of mediation may be made compulsory in cheque bounce cases by making suitable amendments in the negotiable instruments act,” the IMG recommendation said.

The IMG report, being implemented by the finance ministry, said a summary procedure for dealing with cheque bounce cases as a schedule of procedure may be codified, and developed by the department of financial services. The same may suitably be incorporated in the Negotiable Instruments Act, it added.

RBI’s Initiative in Cheque Truncation System – 2010

The RBI set up a working group onÂ Cheque Truncation and e-cheques,Â which studied the Truncation and Imaging processes of other countries and came out with the following recommendations:-

In India the cheques should be truncated at the presenting bank itself and there should not be any amount based restriction.
An electronic image based model will be the mode of truncation.
The storage requirement of the electronic image of physical cheques is necessary and the preservation period should be eight years.
Truncation and standardization of cheque format are seen as independent initiatives with the latter being implemented even after the introduction of cheque truncation. Therefore, currently the settlement should be on the basis of the current structure of the MICR fields.
Public key infrastructure (PKI) to be adopted to protect data and image flow over the network. Digital signatures should be used to establish authenticity, non-repudiation and integrity
The security requirements for the storage of images by the banks or the centralized warehousing agency should be in consonance with the requirements of the IT Act 2000.
From the point of view of efficiency and control, RBI is planning to set up a centralized clearing system and a central warehouse in Delhiwhere a single agency or individual drawee bank can act as the points of storage.

Keeping all these points in minds, RBI has already floated a RFP to various vendors to provide it with an all-inclusive technology for cheque truncation. It has plans of starting the Project in the National Capital Region by July 2005 and then rolling it out to other metros. The overall aim being to eliminate physical transfer of cheques in the peak centers in the next two years time.

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Existing cheque clearing arrangement will continue till year end