The Reserve Bank of India has clarified that its directive to banks, asking them not to honour cheques with alterations, will be applicable only for cheques cleared under the image-based cheque truncation system (CTS).
Cheque Truncation is a system of cheque clearing and settlement between banks based on electronic data/images or both without physical exchange of instrument. Here the cheque is scanned and electronically presented for settlement with the clearing house.
At present, the cheque truncation project is being run only in the Delhi area with Chennai expected to move onstream soon.
The clarification paves the way for bank branches in metros like Mumbai where CTS is still not operational to accept corrected cheques. RBI’s directive had created a flurry in trade circles and even among utilities that have been turning away cheques with any form of correction or alteration even if the changes were validated by the cheque drawer’s signature.
Mobile operator Airtel had sent a message to subscribers, stating that it will not accept cheques with corrections on amount or the payee’s name after July 1. Other service providers and traders who have been accepting post-dated cheques have been turning back cheques with corrections or alterations.
Currently, most of the clearing is done on the MICR system and banks often entertained cheques with alterations, be it the name of the party to whom the cheque is issued, or the date or the amount, provided the issuer of the cheques does is signature besides the correction.
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