Cheque Truncation System – 2010 – (CTS 2010) Guidance Note by National Payments Corporation of India (NPCI)

Cheque Truncation System – 2010 – (CTS 2010) Guidance Note by National Payments Corporation of India (NPCI)

As the deadline for CTS-2010, is coming closer, the various stake-holders are getting their act together

As per RBI Notification No RBI/2009-10/323/DPSS.CO.CHD.No.1832/04.07.05/2009-10  dt.February 22, 2010, IBA(Indian Banks Association) and NPCI, are the coordinating agencies, for CTS - 2010.

Towards this end, NPCI has on 21^st September, 2010 issued a Guidance Note for the roll-out.

The complete Guidance Note can be accessed at

http://www.npci.org.in/CTCircular.aspx

The highlights of the Guidance Note are :

Orders placed by Banks for Cheque Forms, on or after 01/10/2010, must  comply with CTS – 2010 Security features

The Security features contain Mandatory features as well as Optional features

The Mandatory Security features are : -

A) Water Mark (to be incorporated at the paper manufacturing stage)

B) Void Pantograph ( at printing stage)

C)Ultra-violet logo of Bank(at printing stage)

D) Standardized field placements of a cheque

E) Cheque printing colours and background.

F) Microlettering.

G) New Rupee Symbol at CAR (Courtesy Amount Recognition) amount in figure field.

H) Printer Name along with CTS – 2010

Optional Features:-  These are optional features based on the Banks risk perception.

(i) Supplementary watermark containing their own logo  - - - A watermark is a recognizable image or pattern in paper that appears as various shades of lightness/darkness when viewed by transmitted light (or when viewed by reflected light, atop a dark background), caused by thickness or density variations in the paper

(ii) Embedded fluorescent fibres, - - - Invisible colored fluorescent fibres are embedded into the paper during the manufacturing process. The fibres are invisible to the naked eye, but become visible when viewed under an ultra violet lamp. This can be placed at random locations or at pre-determined locations on the Cheque forms.

(iii) fugitive ink, - - - Water fugitive ink is sensitive with most liquid solutions and will smear and stain the document.  Most official stamps uses water fugitive inks (McGraw-Hill, 2007).  This security feature makes it apparent if a document has been altered.

(iv) secondary fluorescent ink, - - - Fluorescent inks are naturally bright inks that reflect and emit light making use of UV light waves, which other inks cannot take advantage of.

(v) Toner fusing - - - Toner Fuse Technology causes Laser Toner to bond permanently to the paper surface. This covert security feature makes it impossible to "lift" words and numbers off the surface of the paper using adhesive tape, without destroying the paper surface.

(vi) check- sum.

(vii) Patterns

(vii) Floral designs

(ix) bleeding ink, - - - An option of bleeding ink could be implemented on a cheque which makes fraud impossible using any water based chemicals, if applied to the cheque a colored solvent reacts and spoils the cheque.  

(x) Structural magnetic security thread

(xii) Hot stamped holograms on multi-city cheques and demand drafts

(xiii) auto-detection tools

(xiv) Use of UV band on sensitive and  key areas of interest on a cheque such as Legal Amount Recognition (Amount in Words), Courtesy Amount Recognition (Amount in Figures), Signature, Beneficiary Name

(xv) pre-encoding of amount field on the MICR band for demand drafts / pay orders (above a self-decided cut-off) before issue to customers

(xvi) Use of check-sum on the face of demand drafts / pay orders (other than the MICR band), etc.

NPCI has advised banks that the additional security features adhere to CTS – 2010 specifications and also not Image heavy.

The deadline for implementation of the CTS 2010 standards is 31/12/2010.

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          One of the interesting aspect of this Guidance Note is that the CTS 2010 Specifications are applicable to all Cheque forms, and not only for Cheques forms for branches under the CTS (Cheque Truncation System) locations.

This might be to ensure that the Speed Clearing process does not get de-railed and also to ensure uniformity amongst the Cheque forms, in our country.

As the INR symbol has been adopted, this also is finding place on the new Cheque Forms.

I guess the next Guidance note will be on the transition period for existing Cheque Forms, already in the financial system. As it is, still Non-MICR cheques are being issued by few Government Departments.

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Another fascinating facet of this Guidance Note, is that the testing fee of Rs1000/- per Cheque Form Batch is to be remitted by Payorder/Demand Draft, and through NEFT.

Yes, I would have preferred the testing fees through NEFT rather than Pay Order/Demand Draft.

Standardisation ( Consistency, Equality) and Enhancement (Enrichment) of Security Features in Cheque Forms

Standardisation ( Consistency, Equality) and Enhancement (Enrichment) of Security Features in Cheque Forms

CTS-2010 Standard

Reserve Bank of India, Department of Payments and Settlement Systems has today released a Notification regarding the minimum specifications for Cheques for CTS(Cheque Truncation System) to be a success. This new standards will not only make Cheque handling safe in CTS environment, but also safe in non-CTS environment.

The Circular No is RBI/2009-10/323 DPSS.CO.CHD.No. 1832/ 04.07.05 /2009-10, dt February 22, 2010 addressed to The Chairman and Managing Director / Chief Executive Officer
All Scheduled Commercial Banks including RRBs / Urban Co-operative Banks / State Co-operative Banks / District Central Co-operative Banks

The link is

http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=5509&Mode=0

Please note that this circular is address to Scheduled Banks including RRB’s/UCB’s/SCB’s and DCCB’s.

In a single circular the whole spectrum of banking industry has been addressed.

As Post Office Banking does not fall under the purview of Reserve Bank of India, the Department of Posts will have to initiate steps to meet the new standards.

When will this new guidelines be effective from?

        A specific deadline has not been announced, but these guidelines will be effective before CTS is live in Chennai.

The nitty-gritty will be finalized by Reserve Bank of India, in consultation with Indian Banks Association and National Payments Corporation of India.

My guess is that as the project is named as CTS 2010 – Standard, the guidelines will go live this year only.

Benefits to customers:-

01)                      Date Boxes are introduced i.e Date DDMMYYYY, instead of the present blank line.

This ensures that the complete date will be filled up, and there will be minimal chances of a wrong date being filled in.

02)                     The Bank’s Name and Bank’s Branch Details are shifted from the present left hand bottom to the left hand top.

03)                     Reserve Bank of India, has advised that as far as possible, the Account numbers should be pre-printed. Pre-printed Account numbers are a must for current account holders and Corporate Customers.

I interpret corporate customers as Salary Accounts too, even if they are under the ambit of Saving Accounts. This is to curtail the frauds.

Once the account numbers are pre-printed it becomes easy for the account-holders names also to be printed on the Cheque books. At the most the first Cheque-book issued in the account might only have the pre-printed account number.

The benefits are more       to the Branch Officials than the customers.

Benefits to Bank Officials:-

·        As this Cheque standards will also be adopted for Non-CTS locations, immense benefits will accrue to Cheque handling officials.

·        The data boxes will minimize date errors.

·        The standardization of the fields will aid in swift processing of a large number of cheques.

To me the most important benefit is the Prohibiting alterations/corrections on the cheques. In rare cases, only date field can be altered/corrected.

In case of alterations/corrections in payee’s name, amount in words, amount in figures, the customers are advised to issue new cheques.

The key to success of the above point depends on customer education. Customers have to be properly educated about the dangers of alterations/corrections in payee’s name, amount in words, and amount in figures

Proper education will reduce the customer dis-satisfaction and increase the customer’s faith in the new standards.

Through the standardization, the processing of cheques can be automated to a great extent, reducing human errors and minimizing frauds.

The proposed standards not only aid in quick processing of large number of cheques, but also increase the comfort level of human resources at all levels of Cheque handling.

This in turn will lead to enhanced customer satisfaction.

Though the proposed standards have been framed for CTS processing, all the Bank cheques by default will have to adhere to this new Standards. Having two sets of standards for CTS cheques and non-CTS cheques will be cumbersome for the banks as well as CTS processing centers.

Payable at Par cheques have become quite common, and Speed Clearing is also picking up. This means literally a Cheque can be paid across any Clearing Location in India, as long as the respective Bank Branch is located in the catchment area of the local Clearing House.

Hence, Banks by default will gradually switch over to the new standards.

Challenges:

Dealing with the existing stock of cheque books:-

Once the deadline is decided, banks will automatically place order for the new Cheque Books. The existing un-issued Cheque books, will have to destroyed.

What about the Cheque leaves already issued to the customers? The customers might be requested to destroy unused cheque leaves held by them. The major challenge will be the handling of cheques leaves already written/signed by customers and handed over to the payee’s i.e Post-dated cheques for Loan repayments. Well, such cheques might be in the System for 3-4years, and which have to be handled as exception cases.

Banks have to switch over from decentralized issuance of cheques books to centralized issuance of cheques books

This will be a major challenge for Public Sector Banks, as they will have to draw up plans to dismantle the existing procedure and switch over to the centralized issuance of Cheque books.

 Customer Education:

Customer education is vital for smooth switch over to the new standards.

Customer’s education has to focus on the following points:

01) The dangers of alterations/corrections in payee’s name, amount in words, and amount in figures.

02)                     The need to order fresh cheques in advance, as otherwise issuance of Cheque books with pre-printed account numbers will be difficult.

03)                     The need to withdraw unused cheques with old standards held by them.

One ground-breaking feature of this Notification is the introduction of the Void Pantograph Security feature.

Void  Pantograph 

A pantograph screen that has the word "VOID" hidden in it, created by using special screens and background designs. When photocopied by a color copier, the word "VOID" appears on the copied document. A document with a void pantograph is more difficult to duplicate than one with a standard pantograph.