Cheque Clearing Systems - Cts - the Initial Journey - India

...

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 fraud, forgery,

tampering or destruction of the instrument, it is entitled to

further demand the presentment of the truncated cheque

itself for verification:

Provided that the truncated cheque so demanded by the

drawee bank shall be retained by it, if the payment is made

accordingly.

 Section 81 (2) and (3) Inserted

(2) Where the cheque is an electronic image of a truncated

cheque, even after the payment the banker who received the

payment shall be entitled to retain the truncated cheque.

(3) A certificate issued on the foot of the printout of the

electronic image of a truncated cheque by the banker who

paid the instrument, shall be prima facie proof of such

payment.

 Section 89 (2) and (3) Inserted

(2) Where the cheque is an electronic image of a truncated

cheque, any difference in apparent tenor of such electronic

image and the truncated cheque shall be a material alteration

and it shall be the duty of the bank or the clearing house, as the

case may be, to ensure the exactness of the apparent tenor of

electronic image of the truncated cheque while truncating and

transmitting the image.

(3) Any bank or a clearing house which receives a transmitted

electronic image of a truncated cheque, shall verify from the party

who transmitted the image to it, that the image so transmitted to it

and received by it, is exactly the same.

 Section 131 Explanation II

Inserted

Explanation II.—It shall be the duty of the banker who receives

payment based on an electronic image of a truncated cheque

held with him, to verify the prima facie genuineness of the

cheque to be truncated and any fraud, forgery or tampering

apparent on the face of the instrument that can be verified with

due diligence and ordinary care.

 Protection for Collecting

Banker u/s 131 diluted

Amendment to Section 131 of NI Act emphasizes the

importance of strict compliance of KYC norms. If the

bank happens to collect any fraudulent instrument or

collect the cheque (even though specially crossed to

its name) and credit the amount to an account, the

bank should be able to trace the customer for

investigation / recovery of funds. The protection under section

131, which a banker had been enjoying is considerably diluted in

CTS environment.

 Movement of Physical Cheque

There is no movement of physical instruments from the presenting

bank to clearing house and then to the drawee bank. The

instruments will be truncated (stopped) at the branches / service

branches of the presenting bank and only an encrypted image,

digitally signed and endorsed by the presenting bank will get

transmitted to the clearing house and to the drawee bank (and

back, in the case of rejections) through a dedicated, online CHI

(Clearing House Interface) networked at the ‘Clearing House’. In

the case of dishonored instruments, the presenting bank itself will

be issuing cheque return memos to the depositors of the

instruments, based on the information furnished by the drawee

banks.

Movement of Image and data

The Clearing Grid

 Benefits of ‘CTS’

 Elimination of transportation of physical instruments.

 Shorter clearing cycles.

 Extended cut off time for cheque deposit by customers.

 Real time clearing position available to banks

throughout the day.

 Reduction in service issues related to cheques lost /

misplaced at clearing house.

 Reduction in expenditure on cheque processing.

 Lesser clearing difference reconciliation issues between

banks.

 Demerits of ‘CTS’

 Require capital intensive hardware and increased

maintenance expenses.

 Huge volume of electronic image

...