CTS tech to drive RBI’s cheque alteration rule

MUMBAI, INDIA: As per Reserve Bank of India (RBI)’s circular —DPSS.CO.CHD. No. 1832/04.07.05/2009-10 dated 22 February 2010, alterations or modifications in cheques will be disallowed (even if a signature has been made at the place of alteration) and banks will dishonor any kind of altered cheques. This new rule will come into effect from 1 December 2010 and all banks will have to strictly follow it.

RBI’s regulation comes after it had successfully introduced Cheque Truncation System (CTS) on a pilot basis in the National Capital Region (NCR) in February 2008. The deployment of CTS has improved customer service with speedy transactions, low Cheque- clearing costs with minimal chances of sheque frauds.

Looking at the existing paper based Cheque clearing mode, which is highly popular in the country, the clearing houses processed on an average about 4.5 million Cheques per day during April to December 2009 period, according to RBI. Clearly, this fact indicates that the cheque clearing mode needs automation to improve efficiency and remove manual processes.

According to Virender Jeet, Newgen Software’s senior vice president-Technology, today, banks and clearing houses in the country are faced with challenges such as variable loads of cheques on certain days, time consuming manual processes and security or fraud related issues.

“There’s a strong need of automation of inward clearance, cheque standardization for straight through process (same day clearance) for banks as well as improving the security aspects,” Jeet says.

He points, the RBI’s ‘CTS-2010 standard’ is aimed at bringing in standardization and enhancement of security features in cheques.

Newgen Software has been closely working with the RBI and various banking bodies and organizations. It was part of the consultation group including banks and technology providers that helped RBI on the aspects of guidelines.

The CTS, also known as Image Capturing System (ICS) uses cheque image instead of the physical cheque for clearing. The cheque image is truncated at the presenting bank and then the captured image moves through various steps in the cheque-clearing process and transactions are settled on the basis of images and electronic data.

“The technology captures extracted data from the electronic images and ensures cheque validation, technical and signature verifications with minimal manual intervention that brings efficiency, accuracy and automation in the whole cheque-clearing process,” Jeet explains.

With the RBI’s — CTS 2010 standard, the banks will undertake standardization of cheques that includes paper quality, watermark, VOID pantograph, bank’s logo printed in invisible or ultra-violent (UV) ink, cheque’s field placements with Optical/Image Character Recognition (OCR/ICR) engines, mandating colors and clutter free backgrounds and prohibiting alterations or corrections of cheques.

Newgen Software, a provider of Business Process Management (BPM) and Enterprise Content Management (ECM) technology solutions has a reach of more than 40 countries globally. It’s custom software such as the CTS can detect any type of alterations and countersign on the payee name, amount in words and numbers.

“We are working in the imaging research space for past 18 years and have developed tools such as Authentic Signature Verification (ASV) which can be easily integrated on the core banking platform,” Jeet adds.