Cheque: Clearing Process, CTS 2010

Cheque is like a written instruction to the bank asking it to pay the person’s whose name is written on cheque the sum of money.  Cheque is just a piece of paper, To get the money it has to be cleared Beginning January 1, 2013 Cheque Truncation System (CTS) would be implemented, whereby flow of the physical movement of cheque will be eliminated in the truncation process. Instead an electronic image of the cheque will be sent along with the relevant key information. In this article we shall explain about how the cheques were getting cleared before January 1 2014,  new CTS 2010 clearing process, new  CTC 2010 compliant cheques, old  cheques. Banks have stopped accepting non CTC 2010 cheques after Dec 31, 2013. Cheque is like a written instruction to the bank asking it to pay the person’s whose name is written on cheque the sum of money. The person who writes the Cheque is called drawer and to whom it is paid is called as payee. Cheque is just a piece of paper, To get the money it has to be cleared. Lets check out the steps in processing the cheque, also called as clearing. Lets say Ram gave a A/C payee cheque to Shyam. Let us see the sequence of events how Shyam get’s the money to his account:

  1. Shyam deposits cheque to his bank.
  2. Shyam’s bank processes the cheque and sends a request to Ram’s bank for payment
  3. If Ram’s bank has funds in his account, his bank will process the payment and release the funds to Shyam’s Bank
  4. Shyam’s Bank will processes the payment and credits the funds into his bank account.

Clearing process for non CTC 2010 cheques

  • The Payee would deposit the cheque is his/her bank. If the payee or beneficiary of cheque has an account in the same bank in the same city the funds are credited into his account through internal arrangement of the bank
  • If the beneficiary has an account with any other bank in the same or in any other city, then his banker would ensure that funds are collected from the payer’s banker through a clearing house. A clearing house is an association of banks that facilitates payments through cheques between different bank branches within a city / place. There are more than 1000 clearing houses operating all over the country facilitating cheque payments. These are managed by the RBI, State Bank of India and other public sector banks. To identify the paying bank, the clearing house looks at check’s routing number, MICR, the nine-digit number at the bottom  of your cheque, to the right of your account number. It identifies postal code/city and state of the origin of the cheque.
  • MICR of cheque

    MICR of cheque

  • The clearing house presents paying bank with the cheque along with a payment request to drawee’s bank, which checks if there are sufficient funds in the account of drawer to pay money.
  • If the drawer’s bank decides to pay then the clearing bank proceeds to settle the check, debiting drawer’s bank and crediting the payee’s bank for the value of the check.The paying bank debits the amount from the drawer’s account.

The clearing process is shown in following picture

Current Cheque Clearing Process before Jan 1 2013

Cheque Clearing Process before Jan 1 2013

Time taken to clear the cheque How fast the money would be deposited into Shyam’s account depends on whether the whether bank of Ram and Shyam cheque’s are of same city. Based on this cheques are of two kinds:

  • Local Cheques – These are cheques whereby the cheque issuer bank branch and the receiver bank branch are in the same city
  • Outstation Cheques –  These are cheques whereby the cheque issuer bank branch and the receiver bank branch are in different cities

Local Cheques – All Local Cheques must be cleared on a T+1 basis. i.e., If I Deposit a local cheque into my bank account today (irrespective of which bank the cheque is drawn or deposited) the funds must reach my account by End-Of-Day Tomorrow. Of course, this is only if the deposit happened before the cut-off time for today. For ex: Lets say ICICI Bank has a cut of time of 1:00 PM. So, all cheques deposited after 1:00 PM the previous day and those deposited before 1:00 PM today are processed in one batch and sent for payment. If you deposit your cheque after 1:00 PM, it will be processed only tomorrow and funds will be available one day after that. Outstation Cheques – Processing of Outstation Cheques depends on location of drawee’s bank.

  • Banks in State Capitals – Max 7 days
  • Banks in Major Cities – Max 10 days
  • Banks in Other Locations – Max 14 days

RBI’s Collection of Instruments has answers to questions likeWhat happens if cheques / instruments are lost in transit / in clearing process?, My bank refuses to accept outstation cheques for collection. Is there any remedy?

Cheque Truncation System CTS 2010

Cheque Truncation System (CTS) or Image-based Clearing System (ICS), in India, is a project undertaken by the Reserve Bank of IndiaRBI, for faster clearing of cheques. CTS is basically an online image-based cheque clearing system where cheque images are captured at the collecting bank branch and transmitted electronically. Truncation means, stopping the flow of the physical cheques issued by a drawer to the drawee branch. The physical instrument is truncated at some point en-route to the drawee branch and an electronic image of the cheque is sent to the drawee branch along with the relevant information like the MICR fields, date of presentation, presenting banks etc. So the process now becomes:

  • In CTS, the presenting bank (or its branch) captures the data (on the MICR band) and the images of a cheque using their Capture System (comprising of a scanner, core banking or other application
  • The collecting bank (presenting bank) sends the data and captured images duly signed and encrypted to the central processing location (Clearing House) for onward transmission to the paying bank (destination or drawee bank). For the purpose of participation the presenting and drawee banks are provided with an interface / gateway called the Clearing House Interface (CHI) that enables them to connect and transmit data and images in a secure and safe manner to the Clearing House (CH).
  • The Clearing House processes the data, arrives at the settlement figure and routes the images and requisite data to the drawee banks. This is called the presentation clearing. The drawee banks through their CHIs receive the images and data from the Clearing House for payment processing. The drawee CHIs also generate the return file for unpaid instruments.
Image Clearing System

Image Clearing System

For customers clearing process of CTS 2010 is no different from the use of traditional clearing infrastructure for clearing paper cheques. Customers continue to use cheques as at present, except to :

  • Use image-friendly-coloured-inks while writing the cheques
  • Avoid any alterations or corrections thereon. For any change in the payee’s name, amount in figures or in words, fresh cheque leaves should be used by customers, as this will facilitate smooth passage through image based clearing system.

As images of cheques (and not the physical cheques) alone need to move in CTS:

  • It is possible for the removal of the restriction of geographical jurisdiction normally associated with the paper cheque clearing. Hence cheques would be multi-city.
  • This would result in effective reduction in the time required for payment of cheques, the associated cost of transit and delays in processing, etc.

Cheque truncation eliminates the need to move the physical instruments across branches, except in exceptional circumstances, thus speeding up the process of collection or realization of cheques. The Reserve Bank had implemented CTS in the National Capital Region (NCR), New Delhi and Chennai with effect from February 1, 2008 and September 24, 2011. After migration of the entire cheque volume from MICR system to CTS, , the traditional MICR-based cheque processing has been discontinued in these two locations. Based on the advantages realised by the stakeholders and the experienced gained from the roll-out in these centres, it was decided to operationalise CTS across the country by Jan 1 2013. For more details read RBI’s FAQ on Cheque Truncation System

Cheques for CTS 2010

All types of cheques can be presented for clearing through CTS. But to achieve standardisation of cheques issued by banks across the country and to reduce cheque frauds set of benchmarks called as CTS-2010 standard are introduced.These include provision of mandatory minimum security features on cheque forms like quality of paper, watermark, bank’s logo in invisible ink, void pantograph, etc., and standardisation of field placements on cheques. As shown in picture below (Ref: Economic Times Check your cheque status)

Cheque features under CTS 2010

Cheque features under CTS 2010

Sample old and new(CTS 2010 compliant) cheques issued by State Bank of India (SBI) are shown below

State Bank of India Cheque before CTS 2010

State Bank of India Cheque before CTS 2010

  1. Branch address with IFSC code printed top of the cheque
  2. Date in dd/mm/yyyy format with boxes
  3. Printers name with CTS-2010 in left side of cheque
  4. A pantograph which shows VOID/COPY while taking photocopy of the cheque below the account number
  5. New rupee symbol instead of bilingual format
  6. “Please sign above” is mentioned on bottom right of the cheque
  7. Watermark “CTS INDIA” to be visible cheque is held against any light.
  8. Ultra Violet logo of Bank printed at upper left corner of cheque to be visible in UV lamps
SBI cheque with CTC 2010 compliance

SBI cheque with CTC 2010 compliance

Sample old and new(CTS 2010 compilant) cheques issued by HDFC bank are shown below

HDFC bank cheque before CTS 2010

HDFC bank cheque before CTS 2010

HDFC bank cheque for CTS 2010

HDFC bank cheque for CTS 2010

HDFC bank cheque for CTS 2010

Krishna has collected CTS-2010 Standard and Old Bank Cheques of India of Canara Bank, IndusLand Bank etc.

How does CTS 2010 affect customers

  • If you have issued post-dated cheques (PDCs)(say for your home or auto loan EMIs), you will have to issue fresh cheques.
  • If you have opted for the ECS (electronic clearing system) mode the new system will not impact you.
  • For issuing cheque after Mar 31 2013 you need cheques which are CTS-2010 compliant.

Banks have stopped accepting non CTC 2010 cheques after Dec 31, 2013. Related Articles:

  • Bemoneyaware Cheque: explains Parts of cheque, Kinds of cheque(Blank, Bearer, A/C Payee), Alternatives to cheques(Demand Draft, Travellers Cheques,Money order, ECS, NEFT, RTGS)

In this article we explained how the cheques were getting cleared before January 1 2013,  new CTS 2010 clearing process, new  CTC 2010 compliant cheques, old and new cheques.

34 Responses to Cheque: Clearing Process, CTS 2010

  1. VIRAL TAMBOLI says:

    Hello Sir,

    I want to know that if i deposited post dated cheque in bank and due to this reason cheque will be returned than bank what amount charged to payee as well as payer?

    • A bank can charge the same rate as for incorrect cheque. It can charge you return fee for the cheque. Charges may vary from bank to bank. You can go to bank and talk to them.
      A post-dated cheque is a cheque issued with a written date in the future or dated after the date of issue.
      If a bank notices a post-dated cheque presented for payment before the date appearing thereon, the cheque will be returned marked post-dated or the bank will hold on to the cheque until it is able to be cashed in. The greatest danger lies in the banker paying a post-dated cheque and subsequently dishonouring another cheque which ought to have been paid but had to be returned due to lack of funds.
      The bank will not honour your cheque since the date mentioned on the cheque has not arrived yet.

      People write post dated cheques because sometimes they do not have that amount in their account and they might be expecting money in their account some time before the date they mentioned on the cheque. Suppose they draw a cheque on 25/6/2016 and mention the same date on the cheque, for an amount of 20,000 and the balance in their account is less than 20k then the cheque gets bounced and owner(person who gives/writes/draws the cheque) has a bad remark on his account.

      The cheque can be cleared only on or after of the date mentioned on the cheque. You can deposit it within 3 months of the date mentioned. Anytime before or after those 3 months, the instrument cannot be cleared.

      If you don’t deposit it after 3 months then it becomes a stale cheque.

  2. Sumit says:

    I hav a hdfc preferred cheque of Rs.50000 as security but now i need to use it. What happens if the cheque is blocked? Can the account holder stop the transaction? He is suppose to pay me. Please guide.

  3. deepak says:

    sir, if any person from outstation have to diposite an amount in my bank acc. througg cheque (which is diff. bank and outstation). then how can he diposit in my acc. . plzz provide me all solution. and where he has to diposit cheque. in her bank acc. or other bank acc.

  4. Ravi says:

    Hi, i have a question reg clearance of check..I got a check from a friend who is having account in x city and I am having account in y city and unfortunately am in z city…what is the procedure to clear the check

  5. GANESH MAHADEO KHATKALE says:

    our society like start the check clearing process…..but i dont know how to start this process

  6. sheeba says:

    I deposited an outstation cheque to icici bank on 15 dec 2015 for an amount of 2,78,337/-. They lost the cheque in branch itself and gave me a false message it was lost in transit. Cheque was issued to me by Embassy of India tajikistan when i was on deputation there. It was a cheque of SBI , Parliament street new delhi. I deposited my cheque in jalandhar icici bank, since my account was with icici. Finally with my efforts i had to get it reissued from tajikistan nd got it after 85 days. Icici bank didn’t do any satisfactory work to get my cheque back. My query is as per RBI guideline how much penality compensation should i get from icici? I have already lodged a complaint with ombudsman nd police also.

  7. PRADEEP says:

    I had issued a cheque of 2,60,000 in favour of a builder dated 23.12.2016.But due to non commitment of the builder I had got the cheque blocked for payment of the cheque by the issuing bank on the said date.
    Is there any validity date of the such cheques issued to the builder from the date of issue ?
    Can the builder present the cheque even after non delivering the flat ?
    Is the cheque considered outstation cheque even if the cheque is issued from another district but from the same state
    What is the solution to get the cheque back or avoid legal complications ?

  8. Ramakrishna says:

    Hi, I have a strange problem with cheque deposit with ICICI bank. I am an NRI and have a NRE Account. A NRI friend of mine has given me a NRE cheque. Yesterday, when we went to deposit that cheque, bank employee says, He needs the confirmation from Drawee ( A NRI who lives in Africa), before accepting the cheque for deposit. I never heard in my 20 years of banking experience any thing like this.

    Any advise.

  9. ronit says:

    my branch is at akhbarngar bt it far away from my resident so can I submit this cheq in nearest brabch if yes than sugges me procedure

    • bemoneyaware says:

      Yes Ronit if bank is same then you deposit your cheque in any branch of the bank.
      The process is same as depositing in home branch.
      You have to go to branch fill the challan and deposit the cheque.

  10. AMIT KUMAR says:

    SIR THANKS FOR GIVING US THE DETAIL
    I deposited a cheque @ 21st november in SBI khagaria, again when i asked after 25 days for cheque @ 15th dec. they said that it was bank mistake they did not send the cheque to related bank and they send the cheque to releted bank. again i complaind against it but no response , @ 5 jan i asked about the cheque status,
    they said abut cheque return, cause : they had to sent it @ state capital patna but by mistake they sent it to hyderabad, now they will send it to patna.
    now i have a issue cheque validy is 12th january today is 6th january it will be cleared or not . 2nd : can a bank cleaer the cheque after the validity lapse if it is the mistake of bank .
    if it will not clear ,who will pay me money because it is a schoarship cheque they will not give me again .. .. will bank take responsiblity ..?

    • bemoneyaware says:

      If any customer has a complaint against a bank due to non-payment or inordinate delay in the payment or collection of cheques, complaint can be lodged with the bank concerned. If the bank fails to respond within 30 days, a complaint with the Banking Ombudsman may be lodged. (Please note that complaints pending in any other judicial forum will not be entertained by the Banking Ombudsman). No fee is levied by the office of the Banking Ombudsman for resolving the customer’s complaint. A unique complaint identification number will be given for tracking purpose.
      Complaints have to be addressed to the Banking Ombudsman within whose jurisdiction the branch or office of the bank complained against is located. Complaints can be lodged simply by writing on a plain paper or online at http://www.bankingombudsman.rbi.org.in or by sending an email to the concerned Banking Ombudsman. Complaint forms are available at all bank branches also.
      Complaint can also be lodged by authorised representative (other than a lawyer) or by a consumer association/forum acting on customer’s behalf. If the complainant is not satisfied with the decision of the Banking Ombudsman, an appeal can be made to the appellate authority in the Reserve Bank of India (Deputy Governor of Reserve Bank of India in charge of Consumer Education and Protection Department)

  11. Vinod Gopal says:

    I Have to get rs 40000 from my friend and he has drawn acheqe of bank of India and deposited today ie 23.12.2015 in his bank of India branch cochin. My ac is with Federal bank kottayam. Will i get the money tomorrow

  12. Sachin M says:

    Thanks a lot for such detailed and well described information in simple language.

    I was looking for CTS-2010 cheque clearing procedure and timeline and came across your blog, to be honest it clarified what I was searching for.
    Actually I recently deposited cheque in SBH, the cheque is CTS-2010 compliant but from another bank and another city. When cheque was not cleared in 10 Days, I revistied branch and asked the reason, the reply I got is my cheque has been sent to original branch as it was not compliant. Now its more than month I am still hearing same answers, I was looking for complaint and escalation of it to higher autorities/RBI. May be if you could suggest me on this matter.

    • bemoneyaware says:

      First verify that cheque is CTC 2010 compliant – if yes why is bank saying it is not compliant.
      Here are the steps you need to take to redress your grievance.
      Step 1: Complain to your bank
      You can visit the bank and meet the officials to sort out the issue. Banks have a dedicated toll-free customer care number, which you can use to lodge your grievance and get a complaint ID. You can also register a complaint on the bank’s website. Once the complaint is lodged, the customer needs to wait for 30 days for the bank to offer a solution or give a suitable reply.

      Step 2: Approach the banking ombudsman
      If your bank does not address your complaint within a month, you can approach the banking ombudsman. This is a senior official appointed by the Reserve Bank of India to redress customer complaints against deficiency in banking services, as per its scheme introduced in 1995. All scheduled commercial banks, regional rural banks and scheduled primary cooperative banks are covered under the scheme. So far, there are 15 ombudsmen, whose offices are located mostly in state capitals. Their addresses and contact details are available on the RBI website.

      The ombudsman tries to effect a legally binding settlement between both the parties within a month. However, if a settlement is not possible, it will pass an award after allowing both the parties to present their cases to him.
      You have to file the complaint at the office of the ombudsman under whose jurisdiction your bank branch is located. The grievances relating to credit cards and other types of services with centralised operations are to be filed with the ombudsman in whose territorial jurisdiction the billing address of the customer is located.

      You can put it down on a plain paper, send an e-mail, or fill the complaint form on the RBI website. There are no charges for filing a complaint. Grounds for rejection

      The ombudsman can reject a customer’s complaint if he has not approached his bank for grievance redressal first, or if the subject is pending for disposal, or has already been dealt with at any other forum, such as a court of law or consumer court. Also, the complaint will not be considered if more than one year has passed since the customer has heard from the bank, or 13 months since the date of representation to the bank. Compensation limit

      The scheme caps the amount of compensation that can be doled out to Rs 10 lakh or actual loss suffered, whichever is lower. The ombudsman may choose to award the compensation, not exceeding Rs 1 lakh, to the complainant for mental agony and harassment. However, so far, this has been limited to complaints regarding credit card operations.

      Legal route

      If you are not happy with the settlement offered by the ombudsman, you can file an appeal before the appellate authority within 30 days. The appellate authority in this case is the deputy governor of the RBI. Alternatively, you can approach consumer redressal forums, which take up bank-related complaints, or even the courts.

  13. Manan says:

    I am new to banking. I had fd in co operative bank, which matures and I took pay order for such amount from bank . I deposit the pay order to my another bank account. How much time it shall take to clear such pay order in my account.

    • bemoneyaware says:

      It should be fast because you have the payorder. It should be cleared in 2 days.
      Both pay orders and demand drafts are used by individuals to make transfer payments from one bank account to another. The main difference between the two is that while a demand draft is a written order directing the payment to be made to a third party outside your city, a pay order is drawn for the third party within your city. They both are, however, different from cheques in that they don’t require a signature in order to be cashed.
      While making a Demand Draft, the Bank deducts the amount from the Bank Account of the Individual who has requested for making the Demand Draft and deposits the same in their own account. And when the DD is presented for clearing, it is the responsibility of the Banker to make the Payment.

  14. Vikram Kumar says:

    I have deposited the cheque on 30.09.2015 bu
    My cheque has has been not cleared.. plz hehehelp me

    • bemoneyaware says:

      Please ask your bank why it has not been cleared. Many reasons could be there-mismatch of sign,amount,insufficient funds

  15. Dhanjit Kumar Das says:

    Dear Sir

    Please confirm my cheque : 225754 status . I had dropped on dated 22.08.15 in your IMT Manesar SBI branch in the name of Dhanjit Kumar Das, but after 5 days cheque not clear . I am try to contact on mobile no: 9868636583 but response found wrong no .Need your support in this regards.

  16. pavan verma says:

    i had given a cheque on 14 and the next day is bank holiday when will the amt will be debited form my account

  17. pavan verma says:

    I had given the cheque on 14 and next day is bank holiday then will be my amt debited from my account

  18. ravi says:

    pls let me know if the cheque isuee the name of ramesh and another ramesh will get the cheque by mistake. does he used the issued cheque?

  19. priya says:

    I have given a cheque for Rs 16000 but i have on 15000 in my account. What will happen to the cheque process??

    • bemoneyaware says:

      Two things will follow if you issue a cheque to your friend and it bounces.
      You will have to pay a penalty.
      Your friend, too, will be penalised by the bank where s/he deposits the cheque. And, if your cheque towards repayment of a loan bounces, then, in addition to the penalty for the bounced cheque, (charged by both banks), you will also pay late payment charges.
      f your S/B account is with ICICI Bank, the penalty is Rs 350 for the first month and Rs 750 thereafter, if it is due to insufficient funds (Rs 50 for technical reasons). If your friend deposits the bounced cheque in a local branch of ICICI Bank, the penalty is Rs 100. If deposited in an outstation branch of ICICI, the penalty is Rs 150. Banks will also charge for expenses such as returning the cheque by post, service charges, etc. If the cheque towards your home loan repayment bounces, you will also have two per cent as late payment charges in case of both ICICI and SBI.

  20. manoj says:

    it is not clearing it is transfer

  21. Rajasekhar says:

    Hai.. I have a hdfc check of Hyderabad branch and i have to deposit into my sbi branch (xxx) of another state..can I deposit into any nearby sbi branch (AAA)?
    If yes, what should I write at branch name (XXX) or (AAA)?
    Also what is the check number from “HDFC bank cheque for CTS 2010” above?
    Please help me ASAP

    Thanks in advance

  22. Pra says:

    Quick query; I was supposed to give a pdc of 5/6/2015. But, by mistake I wrote 5/6/2014. The person deposited the cheque on 1/6/2015 in his bank for clearing. I got to know this when I saw the statement of return charge. Any idea what can be done?

    • bemoneyaware says:

      The Cheque that was deposited has been returned ,as you noticed due to return charges. You now need to call the person to whom you gave the cheque and apologise.
      You can also transfer amount through NEFT.

  23. yathish says:

    whether the drawer & payee holds a/c in same bank( ex;hdfc to hdfc ) with different branches…
    is the clearing happens in same day or with in 2 hours ????

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