Make sure you use CTS cheques to avoid delay in clearance

Using non-CTS cheques will further delay clearance and hence consumers should avoid accepting non-CTS cheques from other party. If you are paying with non-CTS cheques it can take four days or more to clear. Your bank should give you CTS cheques to comply with the RBI order

The Reserve Bank of India (RBI) has been trying to make transition from cheque truncation system (CTS) to non-CTS cheque since last one year. Non-CTS cheques are still in operation, but consumers can expect delay in cheque clearances. It can take four or more days for its clearance, which can impact your payment. Avoid acceptance of other party non-CTS cheques. It is time to get rid of non-CTS cheques and ensure that your bank replaces it with CTS compliant cheques.

With effect from 1st May, banks will clear non-CTS cheques only on Monday and Friday instead of three days a week, which was setup after the CTS was implemented in 2014. The deadline for withdrawal of non-CTS cheques was 31 July 2013, but due to large volumes of non-CTS cheques in circulation, RBI allowed non-CTS cheques clearing to continue for five sessions a week till 31st December.

CTS or Image-based Clearing System (ICS) is an initiative of the Reserve Bank of India (RBI) for faster clearing of cheques. CTS is an online image-based cheque clearing system where cheque images and Magnetic Ink Character Recognition (MICR) data are captured at the collecting bank branch and transmitted electronically. It eliminates the need to move the physical instruments across branches, except in exceptional circumstances. The goal is to reduce the time required for payment of cheques and to lower the cost of transit.

RBI has initially instructed all banks to implement CTS across India by March 2013, but even after one year the system is not fully complete. Few banks have not proactively asked its customers to surrender non-CTS cheques and get CTS compliant cheques from the bank. Customer awareness may be an issue. Those who do not have much usage of cheques will continue holding non-CTS cheques until the banks intervene. Most banks offer one free cheque book every quarter, but many customers do not avail of it, as the existing cheque book may not have been exhausted.

RBI implemented CTS in 2014 for faster clearing of cheques. But, there still are technical or operational issues in bank system leading to delay in cheque clearing. It means loss of savings account interest. Can RBI ask banks at fault to compensate for the delay by paying the interest? Moneylife has come across several such examples.

Is the RBI pushing bank consumers to use National Electronic Funds Transfer (NEFT) and Real Time Gross Settlement (RTGS) instead of writing cheques? If you are transferring big amount from one account to other own savings account, it will be wise to do RTGS. It will avoid the situation of one-day interest loss due to possible CTS issues, which can be a big loss.

Bank customers deprived interest income due to delay in CTS clearances

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