From Jan 1, all non-CTS cheques will bounce

Starting January 1, 2013, banks will not accept cheques that do not conform to the new standards under the cheque truncation system (CTS).

As per a directive from the Reserve Bank of India (RBI), all lenders are mandated to phase out all non-CTS cheques by the end of December.

India’s largest lender, the State Bank of India (SBI) said it has issued a public notice requesting all its branches to start issuing cheques with CTS-2010 standardised features. The bank also requested its customers to surrender non-CTS cheques.
SBI said that it would only accept cheques that conform to new standards from January 1. SBI said all the non-CTS cheques will be out of circulation from December 31, 2012.

Traditionally, cheques were sent to the issuing bank physically for the purpose of verification. The process took 2-3 days for local clearances and more time for branches in other cities.
Under the new system, only scanned images of cheques will be required for clearances. This substantially cuts down the delay suffered due to clearing processes.

However, banks need to issue cheques with standardised features for the system to accept them. Apart from standardisation, the new cheques will also have enhanced security features.

“The homogeneity in security features acts as a deterrent against frauds and the fixed placement specifications felicitate straight-through-processing at drawee banks’ end through the use of image character recognition technology,” said RBI in a notification issued in September.

RBI also directed banks to ensure replacement of non-CTS post dated cheques that may have been held for Equated Monthly Installments before December 31, 2012. While most private banks have migrated to the new system, public sector banks are in the process to do so.