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RBI’s Initiative in Cheque Truncation System – 2010

The RBI set up a working group on Cheque Truncation and e-cheques, 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.

Validity of Non – CTS Cheques extended

As per the Revised Guidelines of RBI the validity of Non-CTS compliant cheques have been extended till 31st  July 2013. Earlier it was extended till 31st March 2013. RBI has issued a note no. 1622 dated 18 March 2013 regarding extension of last date of CTS-2010 cheque book.

DPSS.CO.CHD.No. 1622/04.07.05/2012-13

March 18, 2013

The Chairman and Managing Director / Chief Executive Officer
All Scheduled Commercial Banks including RRBs /
Urban Co-operative Banks / State Co-operative Banks /
District Central Co-operative Banks/Local Area Banks

# Standardization and Enhancement of Security Features in Cheque Forms/Migrating to CTS 2010 standards

Madam / Dear Sir

A reference is invited to our circular DPSS.CO.CHD.No. 955/04.07.05/2012-13 dated December 14, 2012. On a review of the progress made by banks so far in migration to CTS-2010 standard cheques and in consultation with a few banks and Indian Banks Association, it has been decided to put in place the following arrangements for clearing of residual non-CTS-2010 standard cheques beyond the cutoff date of March 31, 2013.

1. All cheques issued by banks (including DDs / POs issued by banks) with effect from the date of this circular shall necessarily conform to CTS-2010 standard.
2. Banks shall not charge their savings bank account customers for issuance of CTS-2010 standard cheques when they are issued for the first time. However, banks may continue to follow their existing policy regarding cheque book issuance for additional issuance of cheques, in adherence to their accepted Fair Practices Code.
3. All residual non-CTS-2010 cheques with customers will continue to be valid and accepted in all clearing houses [including the Cheque Truncation System (CTS) centers] for another four months up to July 31, 2013, subject to a review in June 2013.
4. Cheque issuing banks shall make all efforts to withdraw the non-CTS-2010 Standard cheques in circulation before the extended timeline of July 31, 2013 by creating awareness among customers through SMS alerts, letters, display boards in branches/ATMs, log-on message in internet banking, notification on the web-site etc.
5. A progress report in this regard to be submitted to this department in the format prescribed in the annex, enabling monitoring of the progress made by banks in respect of migration to CTS-2010 standard cheques.
6. In addition, the bank-wise volume of inward clearing instruments processed in the Cheque Processing Centers will be monitored with respect to the CTS-2010 / non-CTS-2010 standard cheques presented on them.
7. No fresh Post Dated Cheques (PDC)/Equated Monthly Installment (EMI) cheques (either in old format or new CTS-2010 format) shall be accepted by lending banks in locations where the facility of ECS/RECS (Debit) is available. Lending banks shall make all efforts to convert existing PDCs in such locations into ECS/RECS (Debit) by obtaining fresh mandates from the borrowers.

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

Please acknowledge receipt and confirm compliance.

Yours faithfully,
(Vijay Chugh)
Chief General Manager