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Wednesday, November 7, 2012

Cheque Truncation - changing the way you write your cheque

World has evolved so much and we are dependent on so many things that life would come to a standstill, if some basic services are not available.  From an age when people bartered things to paper money, we have moved to plastic cards and e-transactions, still life, economy and commerce  depends so much on Banks and on that paper instrument called ‘cheque’.  Before the advent of ATM, it was also the sole means of accessing your money..

Often a Q is asked whether ‘cheque written with lead pencil’ is a valid document – without answering its legality, there could be obvious objection for the simple fact that it could easily be altered Ballpoint pens are probably best for this purpose – remember an advertisement where ‘a will written with fountain ink’ would get obliterated by tear drops and only zeroes would remain… !!,

As a simple precaution, one is advised to print / write cheques in a manner that scammers can’t add numbers to it. This is done by starting at the far left edge of the space, and drawing  a line after the last digit. If you leave space for the scammers, they can add digits.

Heard of truncation  ? The first thing that strikes us is One Day Internationals [limited over matches] getting restricted due to rain – and the flawed system of Duckworth-Lewis method coming into play.   Sure one would be reminded of the  farcical climax to England's World Cup semi-final against South Africa in Sydney in 1992.  In mathematics and computer science, truncation is the term for limiting the number of digits right of the decimal point, by discarding the least significant ones.

For example – 2.732313243423 – when truncated to 3 decimals would be 2.732.   At the outset, it might look simply equivalent to ‘rounding off’ - truncation does not round up or round down the digits; it merely cuts off at the specified digit.

Like many Industrial standards towards standardization of products, banking Sector also has some.  One such RBI initiated measure is :
"CTS-2010 Standard" for Cheque Forms – Specifications – which dovetails many things right from the paper that is to be used; to the information that should be available.  It specifies that all  cheques shall carry a standardised watermark, with the words “CTS-INDIA” which can be seen when held against any light  source. This would make it difficult for any fraudster to photocopy or print an instrument since  this paper would be available only to security printers handling cheque printing.

Now there is something as ‘Cheque Truncation’ which might change the way, banking transactions have been taking place over the years.

Truncation is the process of stopping the flow of the physical cheque issued by a drawer at some point with the presenting bank en-route to the drawee bank branch. In its place an electronic image of the cheque is transmitted to the drawee branch by the clearing house, along with relevant information like data on the MICR band, date of presentation, presenting bank, etc. Cheque truncation thus obviates the need to move the physical instruments across branches, other than in exceptional circumstances for clearing purposes. This effectively eliminates the associated cost of movement of the physical cheques, reduces the time required for their collection and brings elegance to the entire activity of cheque processing.  The stoppage and elimination of transit would curtail the cost of collection of cheques, and removesreconciliation-related and logistics-related problems, thus benefitting the system as a whole.

This Cheque Truncation System [CTS] is expected to bring several benefits to banks and customers, including human resource rationalisation, cost effectiveness, business process re-engineering, better service, adoption of latest technology, etc.  There is news that  State Bank of India (SBI)  will from 1 January accept only those cheques which conform to new standards. To meet the objective, SBI has asked all its branches to issue cheques only with uniform features conforming to CTS (Cheque Truncation System) 2010 standard cheques to their customers.

This move for sure would be followed by all  other banks including private sector and foreign banks.  ve also started the process of phasing out of non-CTS cheques.  The notification of SBI states that “Non CTS cheques will be out of circulation with effect from 31 December 2012 and will not be acceptable in clearing system also,”.  All the customers of the bank are requested to contact their branches immediately to submit their requisition for issuance of CTS 2010 standard cheques and surrender their existing non-CTS cheques for cancellation, it added.  The homogeneity in security features of CTS 2010 standard cheques will act as deterrent against frauds, and the fixed field placement specifications facilitate straight-through-processing at drawee banks’ end through the use of optical or image character recognition technology.

That could also mean a change in the way you have been signing your cheques – not your signature itself, but perhaps the ink with which you sign.  Since the document is to be image copied and sent across, writing with a darker ink / shade might become mandatory.  Also alterations in cheque could easily lead to dishonour of the cheque – so get in touch with your banker to cheque whether you have to surrender the old leaves and obtain a fresh set, and whether to sign in ‘blue – black – blue black’ thick and legible….

With regards – S. Sampathkumar.

1 comment:

  1. Agree with you, The World has evolved so flies, and there's nothing to be done about it. It remains only to correspond with the trends. If you want to get better in writing, then it's better to use custom writing online