CTS/Cheque Truncation System

Before 1st August 2013:

- When you issued cheque to someone, she had go to her bank to deposit the check. Then the check
was physically moved from her bank to your bank. And this involved a lot of time and risk.

After 1st August 2013:

- When you issue a cheque to someone, she has to go to her bank to deposit the check. Then the
electronic image of cheque is transmitted to your bank. And the physical cheque is retained by the
presenting bank. This is known as CTS.

Initially RBI decided to implement CTS from 1st Jan 2013 and instructed the banks to withdraw all the
non-CTS cheques in circulation.

Implementation of CTS was postponed till April 1st 2013

Postponed again till 31st July 2013. Finally, CTS came into effect on 1st August 2013.

Advantages:`

- Less Frauds

- Faster Clearance of cheques

- Risk of loss of cheques in transit is eliminated

Some features of CTS cheques:

- Printer details printed on the extreme left of the cheque

- Rupee symbol where besides the area where the amount is required to entered in figures

- A wave like design(VOID Pantograph) below the area where the A/C # is printed

- Signature space indicator

- Details of the bank and it’s logo is printed on the face of the cheque
RBI has advised that though non CTS-2010 standard cheques will continue to be accepted post July 31,
2013, they will be cleared at less frequent intervals and may incur additional charges.

Bank

A bank is a financial institution that deals with deposits and advances and other related activities. It
receives money from those who want to save, in the form of deposits and it lends money to those who
need it

Banking

Banking means the accepting, for the purpose of lending or investment, of deposits of money from the
public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise. Banks
lend out this money in order to earn a profit.

CAMELS

CAMELS is a rating system used to rate banks.

Capital Adequacy

Asset Quality

Management

Earnings

Liquidity

Sensitivity to Market Risk

Retail Banking

It is mass-market banking in which individual customer use local branches of larger commercial banks.
Service offered include Personal Loans, Credit Cards, Debit cards, Mortgages etc.

Bank Rate

Bank Rate is a rate at which RBI lends money to other banks and financial institutions.

Bank Rate is a tool which RBI uses for long-term purposes.

All the banks in all likelihood increases their lending rate when RBI raises the Bank Rate.
Pledge

Customer requires Loan -> Goes to Bank -> Bank keeps the possession of some movable security ->
Bank gives Loan to the customer

Bank has the right to sell the movable security and adjust it’s proceeds towards the loan amount due, in
case, the customer defaults.

Example: Loan against NSC, Gold Loan

Hypothecation

Customer requires Loan -> Goes to Bank -> Bank gives Loan to the customer against some movable
security; The possession of the movable security stays with the customer

Bank has the right to take the immovable security in possession and sell it off, in case, the customer
defaults.

Example: Car Loan

Mortgage

Customer requires Loan -> Goes to Bank -> Bank gives Loan to the customer against some immovable
security; The security is mortgaged in favour of bank; The possession of the security stays with the
customer.

Bank has the right to take the immovable security in possession and sell it off, in case, the customer
defaults.

Example: Home Loan

Crossed Cheque

A cheque is made crossed by drawing two parallel lines on the top left hand side corner of the cheque or
across the whole check.

Crossed cheque – the cheque can only be