New format cheques to become mandatory with New Year

BANK CHEQUES TO BE MORE SECURE AND QUICKER TO PROCESS NOW

ANAND OBEROI
GANGTOK, 21 Dec: Checking your respective bank cheque status has become mandatory following an RBI directive since only those cheques issued in the new format with uniform features will be honoured from 01 January, 2013 onwards. Make sure you add one more point to your ‘list of things to do’ before the New Year.
The Reserve Bank of India has directed all banks in the country to issue cheques with uniform features conforming to the Cheque Truncation System (CTS) 2010 standard from the existing Magnetic ink Character Recognition (MCR) by the end of this month.
“The homogeneity in security features act as deterrent against frauds, and the fixed field placement specifications facilitate straight-through-processing at the drawee bank’s end through the use of optical or image character recognition technology as per the latest notification,” explained an RBI official while speaking to NOW! today.
It may be mentioned that adherence to CTS-2010 standards has inherent advantages as the security features in cheque forms help the presenting banks to identify the genuineness of the drawee banks' instruments while handling them in the image based scenario.
It was further stated that this move of issuing new cheques instead of the ones currently in circulation is basically to ensure the time-bound migration to CTS-2010 standard cheque formats (new format cheques) and all banks throughout the country have been advised to arrange only "multi-city or payable at par CTS-2010 standard cheques” starting this January.
“This new format of cheques will also speed-up the entire cheque clearance process since everything will be done online. The risk factor of cheques getting misplaced or lost will also be done over with. In cities like Mumbai there are an estimated 7 lakh cheques that are circulated every-day, so you can imagine the load and pressure. The new system that is image based will make transactions even safer,” stated the RBI official.
At present, all banks, (26 banks having cheque clearance services in Sikkim) are in the process of arranging to withdraw the non-CTS-2010 standard cheques in circulation before 31 December, 2012 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," informed the RBI official.
The introduction of new cheque standards 'CTS 2010' was warranted on account of several developments in the cheque clearing namely growing use of multi-city and payable-at-par cheques at any branch of a bank, increasing popularity of speed clearing for local processing of outstation cheques and implementation of grid based CTS for image-based cheque processing etc.
“If you haven't received the new form of cheque books already, speak to your bank as early as you can. Banks could adopt two methods to replace the old cheques. One is to send new cheque books by registered post and ask users to cancel the old ones. Customers may be asked to show proof of the same to the bank. They may also ask customers to surrender the older ones. Or, the customers can visit the bank branch themselves to surrender the old cheques and receive the CTS-compliant ones," stated the RBI officer. Also, banks will not charge any fee for replacing the old cheque leaves.
The new system will more importantly eliminate physical movement of cheques for clearing. Instead, only their electronic images, along with key information, will be captured and transmitted. It will make the clearing process more efficient, secure and quicker; but for that, you must switch to new cheques with prescribed standard features before 31 December, it was informed.
Bank account holders can continue to use their old format cheques for another three months as the Reserve Bank of India has extended the deadline for banks to issue new format cheques with uniform security features till March next year.
However, it was also informed that the RBI is taking into consideration representations from various sectors including banks, and it has been decided to extend the time up to March 31, 2013 for small banks like those in Sikkim to ensure withdrawal of non-CTS 2010 Standard cheques and replace them with CTS-2010 Standard cheques. It was also mentioned that by the prescribed time, all the banks in Sikkim would also have the new machine installed, only after which the process will be totally usable.
While most of the banks in Sikkim have confirmed that they are issuing only multi-city or payable at par CTS-2010 standard cheques at present, representations have been received from various stakeholders requesting an extension beyond 31 December, he stated.
It may also be informed that Magnetic ink character recognition, or MICR, is a character recognition technology used primarily by the banking industry to facilitate the processing and clearance of cheques and other documents. The MICR encoding, called the MICR line, is located at the bottom of a cheque or other voucher and typically includes the document type indicator, bank code, bank account number, cheque number and the amount, plus some control indicator.
The technology allows MICR readers to scan and read the information directly into a data collection device. Unlike barcodes or similar technologies, MICR characters can be easily read by all. The MICR E-13B font has been adopted as the international standard in ISO 1004:1995.
It may be informed that till now cheques were being processed manually using either the Sort-A-Matic or Top Tab Key method. The processing and clearance of cheques is very time consuming along with the significant cost involved in cheque clearance and bank operations.
As the number of cheques for clearances increased immensely, a replacement was sought for automating the process. Standards have now been developed to ensure uniformity in financial institutions. The Stanford Research Institute and General Electric Computer Laboratory had developed the first automated system to process cheques using MICR.