Complete CTS Guide

Introduction Need for CTS Technology Key feature of CTS cheque or Difference between CTS and NON CTS Any Change from customer point of view Benefits of CTS cheque Clearing Process Flow CTS Is CTS Legal in India Implementation of CTS in India What is P2F in CTS Procedure of P2F in CTS

From last two years we have noticed advertisements in newspapers, magazines put up by banks and other financial institution insisting account holders to stop circulating non-CTS compliant cheques and replace their old cheque books with new CTS enabled ones. Many banks tried various method for creating awareness through various modes of communication like SMS alerts, letters, display boards in branches and ATMs, pop-up messages in internet banking and notification on website. This is so because we are now introducing technology in cheque clearing system. By the introduction of this an electronic image of the cheque will be sent along with relevant information. Hence Truncation is the process of stopping the flow of the physical cheque issued by a drawer at some point with the presenting bank. 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. ‘CTS’ is the Process of stopping the physical movement of cheques from Banks to clearing house. The Electronic images of the cheques are captured for processing. The following 3 different images bearing the following standards are captured Front Gray scale (Minimum DPI:100, Format: JFIF, Compression :JPEG) Front Black and White (Minimum DPI:200, Format: TIFF, Compression: CCIT G4) Back Black and White (Minimum DPI : 200,Format : TIFF, Compression: CCIT G4) The MICR data in the Cheques will be captured as present on MICR band. Amount is captured manually using the capture solution. Captured images along with the data are exchanged across the banks. The Images and Data are getting transmitted over the secured network. The Settlement of the CTS happens on the basis of MICR data captured from the cheques. Physical cheques are retained at the presenting bank itself.

Go to TOP The central bank of any country(RBI in India) is usually playing the role for development of national payment systems. Similarly central bank of India i.e RBI has been playing this developmental role and has taken several initiatives for Safe, Secure, Sound, Efficient payment system in country. It is RBI effort due to which customer payment in India is in near real time in the form of RTGS and NEFT.But still cheque is widely used for mode of payment.Aprrox 75 to 80 percentage of transaction in a bank is through cheques, due to this RBI wants fast clearing process of cheque hence introduced CTS.

Go to TOP There is a huge difference between CTS and Non CTS cheques.In a simple way I can say that new CTS cheque book contains all security features required for processing online. However some of the features of CTS cheques are Cheque printer details: New CTS cheque contains information of printer where they are printed along the words ‘CTS-2010’ mentioned along the area where we tear off the leaf from the cheque book. Rupee symbol: One can find this symbol where we write amount in figures. Watermark : In order to protect CTS cheque from being photocopy ,all cheques shall carry a standardised watermark, with the words "CTS-INDIA" which can be seen when held against any light source. VOID pantograph: all CTS cheques contain a word VOID that can be visible to naked eyes but not in the image that is transmitted to clearing house. This feature should not be visible on the scanned image at the resolution specified in CTS but should be clearly visible in photocopies and scanned colour images as resolution used in such cases would be above the prescribed CTS standards. This would act as a deterrent against colour photocopy or scanned colour images of a cheque. Bank logo and its Details: When we put any CTS cheque under UV lamp detail of the bank along with logo can be visible this is so because all the detail are written with invisible ink. Again adding additional layer of security. Please sign above : Your CTS cheque book clearly shows the place where you have to sign in cheque. Printing of account field : All cheques should, as far as possible, be issued with the account number field pre-printed. Sample of CTS cheque approved by RBI

Go to TOP There is no change in writing the cheques but one must use the following convention While writing cheques use such pen that is image friendly Alteration and correction not allowed in CTS at all. If there is any mistake use new leaf rather doing correction in same leaf. While submitting cheque in bank try to use all pins rather staple. Try to keep cheques fresh means rough or torn out cheque cannot be scanned by scanner.

Go to TOP Get faster proceeds of cheques even on the same day. Since CTS is based on clinet server technology ,due to this data can be accessed anywhere where we have CTS network. Enquires about cheques by customer can be satisfied easily. For eg say customer forgot to whom he had issued cheque we can simply ask cheque number and search in CTS application and provide him an image with required details. Due to CTS the scope for frauds inherent in paper instruments is greatly reduced as only image moves to paying bank and physical instrument remains with presenting bank. CTS also increases security by embedding watermarks, logos, bar-codes etc

Go to TOP Branches first collect cheques from customer and then at scheduled time send them to their respective service branch. Then service branch captures the data (like MICR code,cheque number, amount etc) and the images of a cheque using their Capture System (containing scanner, core banking or CTS application) which is internal to them, and meeting the specifications and standards prescribed for data and image. After this complete information of cheque securely transmitted at CHI then from CHI to CH where actual settlement of clearing occur. To ensure security, safety and non-repudiation of data / images, end-to-end Public Key Infrastructure (PKI) has been implemented in CTS. As part of the requirement, the collecting bank (presenting bank) sends the data and captured images duly signed and encrypted to the central processing location (Clearing House) for onward transmission to the paying bank (destination or drawee bank). For the purpose of participation the presenting and drawee banks are provided with an interface / gateway called the Clearing House Interface (CHI) that enables them to connect and transmit data and images in a secure and safe manner to the Clearing House (CH). The Clearing House processes the data, arrives at the settlement figure and routes the images and requisite data to the drawee banks. This is called the presentation clearing. The drawee banks through their CHIs receive the images and data from the Clearing House for payment processing. The drawee CHIs also generate the return file for unpaid instruments, if any. The return file / data sent by the drawee banks are processed by the Clearing House in the return clearing session in the same way as presentation clearing and return data is provided to the presenting banks for processing. The clearing cycle is treated as complete once the presentation clearing and the associated return clearing sessions are successfully processed. The entire essence of CTS technology lies in the use of images of cheques (instead of the physical cheques) for payment processing.

Go to TOP Yes,The legal basis for introduction of the new system of "cheque Truncation" has been established with the passage of the Negotiable Instrument (Amendment) Act 2002, which brought in a significant change to the Information Technology Act 2000 thereby bringing the cheque within purview. Amendment in Negotiable Instrument Act 1881 such as Presenting Banker’s to verify the genuineness of the cheque. This is very important as per the amended Negotiable Instrument Act 1881; presenting bank is responsible for the genuineness of the cheques. The member banks have to enforce KYC (Know Your Customer) norms in letter and spirit. In terms of Section 64(2) of the Negotiable Instruments Act, “where an electronic image of a truncated cheque is presented for payment, the drawee bank is entitled to demand any further information regarding the truncated cheque from the bank holding the truncated cheque in case of any reasonable suspicion about the genuineness of the apparent tenor of instrument, and if the suspicion is that of any manipulation, forgery, tampering or destruction of the instrument, it is entitled to further demand the presentment of the truncated cheque itself for verification. with amendments in the section 6 and 1(4) ,coupled with the introduction of 81A to the NI Act 1881 Trunc. of chq is now legalized

Go to TOP In India CTS is implemented by RBI in collaboration with NPCI.Under CTS implementation entire clearing house is divided into three gird i.e. Southern grid , northern grid, western grid.It is like divide and conquer algorithm because it is easier to manage the grid rather then managing single clearing house. In grid several state are combined to from single grid.

Go to TOP P2F is the process in which government cheques and cheques that not qualify image standard are physically handed over to the drawee bank. This is so because CTS is in its earlier implementation stage and no bank want to take risk at least not with government cheques. When instrument is returned with reason "image not clear present again "or "present again with paper" then also bank have to submit image as well as physical instrument to drawee bank.It is said that when CTS is 100% then there will be no P2F. Timing of P2F Weekdays: 1930 hrs to 2030 hrs Saturday : 1630 hrs to 1730 hrs The timings for exchange of physical instruments will be announced by the Clearing House from time to time, if modified.

Go to TOP When scanning of outward cheque is completed, a report of P2F generated and we have to take out all P2F instrument from the bunch of cheque which we have scanned. After that all banks representative meet at central clearing centre run by NPCI and exchange their P2F cheques. How we came to know about quality of images? We do not need to do anything for this as this is taken care by scanner itself. There is an inbuilt function in scanner application that automatically checks the quality of image, and if quality is not as per standard, it will automatically marks that cheque for P2F.