Your Cheques Can Be Permanently Banned After January 1, 2019: This Is What You Should Do
An old RBI rule will come into force after January 1st, 2019 and you should be prepared.
A very big change is about to hit the Indian banking sector, as a particular type of cheques faces permanent ban after January 1st, 2019.
But no need to panic – We will tell you exactly what you should do now.
Non-CTS Cheques Will Be Banned
December 31st is the last day of using Non-CTS cheques for account holders of all banks including SBI (State Bank of India), HDFC, Punjab National Bank, ICICI, Bank of Baroda and others. Non-CTS cheques have been banned by RBI starting January 1, while these cheques will be invalid for customers of SBI from December 12.
RBI had issued a notice about three months ago, stating that Non-CTS cheques will be regarded as invalid starting January 1. Following this, HDFC had sent out a circular to notice its customers regarding discontinuation of separate sessions for clearance of non-CTS cheques. Similarly, the Punjab National Bank informed their customers to replace their non-CTS compliant cheques.
What is CTS?
CTS is the abbreviation of Cheque Truncated System, which in simple terms means stopping the physical transport of cheques midway. Instead, an electronic image is generated for transmission of the amount, thus truncating the journey of the cheque by the Clearing House.
Why are Non-CTS cheques banned?
RBI’s procedural guidelines stated that cheque clearing systems involved physical movement of the cheque from one bank to another thus elongating the overall process of encashing the cheques at each stage of the clearing cycle. Also, as per a restrictive clause in the Negotiable Instruments Act, 1881, the cheques were required to be presented at the drawee branch for clearing.
The RBI says, “With suitable amendments to The Negotiable Instruments (NI) Act, 1881, The Information Technology (IT) Act, 2000 and The Bankers’ Book Evidence (BBE) Act, 1891, the legal framework was put in place for the introduction of cheque truncation and e-cheques in India.”
What steps are to be taken now?
- SBI customers should encash any Non-CTS cheques before December 12, customers of other banks can encash before December 31.
- Every account holder must deposit their non-CTS cheques and cheque books in their respective branch and get new cheque leaves or books as per the new CTS 2010 standard. Remember, the new cheque books are free of cost.
In the years to come, keeping in mind the cost overheads, banks will probably ban the usage of cheques altogether. It looks like banks have taken a progressive step forward with the goal of digital, cashless India in mind.
All Cheques Will Be Banned In India?
Last year around the same time, we had reported a possibility: Cheques can be altogether banned in India, under Digital India push.
However, cheques are still pretty much active in India, and an important financial tool as well.
Do you think that cheques are losing its relevance in this age of mobile wallets and UPI? Do share your opinions by commenting right here!