If you have been wondering why your bank has been repeatedly sending you text messages and emails to change your old cheque book, even though you have plenty of leaves left, here’s the answer:
From January 1, India will move to a faster, more efficient and secure payment settlement system in which banks will only honour cheques embedded with new features.
Under the new Cheque Truncation System (CTS), cheques will be cleared in a day — against three days taken on an average at present.
The system has had a successful pilot run in a few pockets after the Reserve Bank of India (RBI) issued the roadmap for migrating to the new structure in a circular issued last December.
The CTS will do away with the need for physical movement of cheques from a bank branch to a clearing house before the amount is credited to the customer’s account. Instead, entrenched with standardised features such as watermarks and a pantograph, cheques will be cleared electronically through an encrypted and highly secure online gateway.
Besides cutting down on time, the new system will also eliminate clearing-related frauds and help slash banks’ manpower and administrative costs.
For those who have issued post-dated cheques to pay EMIs for existing house, auto and other loans, banks said they will honour such cheques for the time being to facilitate a hassle-free transition to the new regime.
“Customers need not worry as all cheques which have been issued for various reasons including EMIs (equated monthly installments) for homes or cars would be honoured by banks as long as there is adequate funds in their accounts,” TM Bhasin, CMD, Indian Bank said.
Indian Overseas Bank CMD M Narendra echoed the sentiments. “Customers would have to use the new series for fresh transactions but all issued cheques would be honoured and customers would not have to face any difficulty,” he said.
However, bankers said that eventually, customers would be expected to shift to the new series of cheques and those that have been already issued for longer periods especially for EMIs would also need to be replace with the new ones.
“We can’t specify the time frame by when customers would be required to fully switch to the new cheques,” a senior bank executive who did not wish to be identified, said.